click to edit master title style - nigerian stock exchange nifc and office... · click to edit...

Click to edit Master title style

Presented by

Mr. Haruna Jalo-Waziri

EXECUTIVE DIRECTOR |Business Development For

Joint Senate committee on Banking, insurance and Other Financial Institutions July 24, 2013

REVIEW OF THE NIFC AND OFFICE OF THE NIGERIAN FINANCIAL OMBUDSMAN LEGISLATION:

Click to edit Master title style | Agenda

1 •Executive Summary

2 • Our Understanding of Proposed Legislation

3 • Review of Global Best Practices

4 • Importance of Proposed Legislation to Nigeria

5 • Our Advocacy Track Record

6 • Our Value Add Proposition

7 • Conclusion

24-July-2013 The Nigerian Stock Exchange 2

Click to edit Master title style | Executive Summary

• As a part of Federal Government of Nigeria’s (FGN) goal to transform Nigeria into a competitive global economic force, there are several initiatives and legislation underway to support the “Nigerian Vision”

• The Nigerian Stock Exchange (NSE) is in full support of the FGNs transformational agenda and has dedicated the appropriate resources to assist the government

• Over the past two years, the NSE has been effective in managing advocacy initiatives, with the recent execution of the remove of VAT and Stamp Duties from market transactions. We have also been successful at providing margin debt relief to the stock broker community, working with several arms of the FGN

• As Nigeria considers the implementation of the Nigerian International Financial Centre (NIFC) and the Office of the Nigeria Financial Ombudsman legislations, the NSE can bring to bear its expertise and global network in ensuring seamless implementation

• It is important to note that IFC economies have grown very rapidly in the period since 1980, with average per capita annual growth rates of 3.3 percent, compared to 1.4 percent globally. As it relates to Ombudsman efforts, there are over 80 countries globally who have implemented and realized the value of this role

• The purpose of this presentation is to illustrate how the NSE can play a vital role in the legislative and implementation process by:

– Providing an overview of our understanding of the proposed legislation

– Reviewing international trends in international financial centres (IFC) and ombudsman platforms

– Detailing the importance of the proposed legislation to the Nigerian economy

– Stating the advantages and disadvantages of each bill

– Highlighting how we can assist in achieving the “Vision”


Click to edit Master title style |

• This bill seeks to establish the Office of the Nigerian Financial Ombudsman, as an independent body charged with the responsibility for resolving financial and related disputes in the Nigerian financial services sector and for related matters

• The Office shall have the capability to inquire into and settle any complaints or disputes related to the following;

o Individual or corporates

o Financial Institutions

o Regulators in the financial services sector

• Additionally, the Office shall have the power to entertain complaints and settle disputes in transaction relating to (i) banking (ii) mortgage (iii) insurance (iv) investment and securities, etc.

• The IFC bill seeks to establish the NIFC for the purpose of creating a world-class financial zone that would act as a catalyst for economic growth in Africa

• The NIFC will be established as a full service IFC focusing on a broad range of financial and ancillary services driven by a unique and separate regulatory, administrative and judicial framework in line with global standards

• To ensure global competitiveness ,the NIFC may provide some of the following incentives for stakeholders;

o A competitive corporate and personal tax code

o A competitive VAT on products and services

o Centralized approach to business registration

o 100% ownership of businesses

o Industry specific incentives

Our Understanding of the Proposed Bills

Overview of NIFC Bill Overview of Ombudsman Bill


Click to edit Master title style | Leveraging on Global Best Practices

FACTS AND FIGURES

• There are over 75 IFCs around the world • In 2011, the Xinhua News Agency of China, partnering with the

Chicago Mercantile Exchange and Dow Jones & Company released the Xinhua-Dow Jones International Financial Centres Development Index

• The Global Financial Centres Index is compiled by the London-based British think-tank Z/Yen and is published annually by the City of London Corporation

• Worldwide Centres of Commerce Index is an index of the world's cities by MasterCard which provides rankings for 75 leading commercial cities

• Accordingly, Nigeria can leverage from best practices observed from leading economies

IFC DEVELOPMENT INDEX

WORLDWIDE CENTRES OF COMMERCE INDEX GLOBAL FINANCIAL CENTRES INDEX

0

20

40

60

80

100

New

Yo

rk C

ity

Lon

do

n

Toky

o

Ho

ng

Ko

ng

Sin

gap

ore

Shan

ghai

Fran

kfu

rt

Par

is

Zuri

ch

Ch

icag

o

Ind

ex V

alu

e

600 650 700 750 800 850

FrankfurtGeneva

ZurichBostonTokyoSeoul

SingaporeHong Kong

New York CityLondon

Index Value

0

20

40

60

80

100

Lon

do

n

Ne

w Y

ork

Cit

y

Toky

o

Sin

gap

ore

Ch

icag

o

Ho

ng

Ko

ng

Par

is

Fran

kfu

rt

Seo

ul

Am

ste

rdam

Ind

ex V

alu

e


Click to edit Master title style | Case Study: International Financial Centres

• London is Europe’s leading financial centre. In 2009,17% of all global trading in equities took place, a higher proportion than anywhere except New York

• UK fund managers (predominately based in London) managed portfolios worth 11 per cent of the global total, second only to New York

• Commodity trading forms an important part of the London financial sector, as it hosts three major derivatives exchanges that account for around 15% of global trade

• Hong Kong’s economic prosperity depends very much on its continued success in maintaining its status as an IFC

• Hong Kong led the world in total funds raised through Initial Public Offerings (IPOs) from 2009 to 2011, surpassing London and New York

• As at the end of 2011, there were 152 licensed banks (73 of which rank in the world’s top 100), 20 restricted licensed banks and 26 deposit-taking companies

• The DIFC was established in 2004 as a financial centre to serve the region between Western Europe and East Asia

• The DIFC is now ranked as the world's fastest-growing IFC, and continues to attract international clients from around the world

• DIFC issues operating licenses for 6 sectors including banking services, capital markets, asset management and fund registration, reinsurance, etc.

• At the end of Q1 ‘12, AUMs by DIFC-based companies was at $8.1bn

London International Financial Centre

Hong Kong International Financial Centre

Dubai International Financial Centre

Click to edit Master title style | Case Studies: Global Ombudsman Platforms

7

Brazil: Hearing Officer usually heading a service called Ouvidoria acts in the Ombudsman role for Brazil, whereby each government agency defines its own service

Russia: The Commissioner is appointed for a fixed term by the Parliament. The ombudsman cannot be dismissed before the end of his term, and is not subordinate to any body of power, including the President or the Government

India: Designates several ombudsmen for the redress of grievances and complaints from individuals in the banking, insurance and other sectors.

China: The China Ombudsman listens, discusses, answers questions, provides information, and identifies options and strategies for resolving a conflict situation

Kenya: The Commission on Administrative Justice (CAJ) was established by the Commission on Administrative Justice Act 2011.

South Africa: The Public Protector is an office established by the Constitution of South Africa. Its mandate to guard democracy, similar to the office of ombudsman in other countries

There are over 80 countries around the world with Ombudsman offices, evident of the importance of the role

in financial expansion and growth

Emerging Market Examples

Africa Examples

Worldwide effort of Ombudsman Representation has strengthened Economic Development

24-Julyl-2013 The Nigerian Stock Exchange 7

Click to edit Master title style | Importance of IFC to Nigeria

DESCRIPTION

Change in governance

Change in Corporate Structure

• Nigeria to be recognized as a global financial market with legislation and an investment structures on par with other leading economies

• Financial inclusion (amongst international investing community) to drive expansion of capital market from an asset class (i.e. derivatives) and service offering perspective (i.e. hedge funds)

• Academic research confirms that when financial sectors are more developed, economies grow faster, and that the greater development of the finance sector is a key cause

• Increase trending in FDI/FPI; increase tax revenues; and enhanced government funding options vis-à-vis the international bond market

• In addition to the employment opportunities created working for banks, insurance companies, intermediaries, hedge funds, etc., there are also jobs created working for related companies such as law firms, accountants, IT suppliers as well as the informal sector

• As an example, the wholesale finance sector contributed 1.36 million jobs across the EU in 2008

Global Recognition

Economic Development

Job Creation

INCENTIVE

• The global tourism industry is worth an estimated $1.15 trillion in 2012, with revenue rising at an annualized 1.5% over the past five years

• IFCs in countries that cater to the tourism industry, such as Dubai and Hong Kong, can take advantage of tourism revenues thereby increasing fiscal income

Growth of Tourism Industry


Click to edit Master title style | Ombudsman: Improving our Global Perception

• Nigeria currently ranks 139 out of 174 nations in Transparency International’s 2012 Corruption Perception Index

• Factors contributing to this poor ranking include, amongst other things (a) poor transparency in regards to public spending and contracting, (b) poor anti-money laundering rules, and (c) overall lack of accountability in the nation

• The implementation of the Office of Nigerian Financial Ombudsman creates an opportunity for an extra layer of transparency and independence, in addition to initiatives that the FGN is already pursuing to root our corruption and fraud in the country

• The Office of the Nigerian Financial Ombudsman can deal with items such as complaints from consumers about various financial matters including, banking, insurance, mortgages, pensions, savings and investments, credit cards, loans and credit, financial advice, stocks, shares, unit trusts and bonds

• Nigeria can leverage on global best practices from its peers in Africa or other developed/emerging markets to ensure the appropriate framework for independence is established

– For example, the Financial Ombudsman Service in the UK is funded by the UK's financial services sector through a combination of statutory levies and case fees (as compared to funding from a Gov’t agency);

– Fees are paid by financial businesses that are regulated by the Financial Services Authority (FSA) or licensed by the Office of Fair Trading (OFT) and are automatically covered by law by the ombudsman service


Click to edit Master title style | Impact on Financial Markets

INCREASED MARKET ACCESS

Greater access to international financial markets

EFFICIENCY

Products and services to be offered at the lowest cost to both institutional and retail

consumers

EFFECTIVENESS

Creation of products and services is essential to meet

the needs of customers

STABILITY

Establishment of a safe, sound and secure financial system able to withstand sudden adverse economic

and financial shocks

ENHANCED REGULATIONS

Development of efficient rules and regulations to support an

innovative financial system

INFRASTRUCTURE

Promotion of strong domestic institutions and efficient, stable payments


Click to edit Master title style | Risk versus Rewards of Proposed Legislation

Nigerian International Financial Centre

Nigerian Financial Ombudsman

Rewards Risks Rewards Risk

• Enhanced economic development for Nigeria

• Large capital funding requirements

• Facilitates two-way, informal communication and dispute resolution to resolve allegations

• Typically, recommendation / decisions are not binding

• Deepen domestic financial markets

• Public advocacy gap

• Improved Global perception on investor protection

• Maintenance of full independence given government position

• Enhance integration with external markets – Africa & Global

• Political challenges

• Independent from government

• Cannot provide a quick solution to complex problems

• Speed up infrastructural development

• Security & safety

• Improved stakeholder management

• Job creation

• Project management

• Bad practices may be remedied

• In considering the way forward for the proposed legislations, there are several advantages and disadvantages that must be accessed to ensure seamless implementation


Click to edit Master title style | Our Advocacy Track Record

1. VAT and Stamp Duty elimination from

secondary market transaction cost

(Awaiting gazzetting)

2. Margin Debt Relief by AMCON


Click to edit Master title style | Our Advocacy Track Record (Cont’d)

Review of Exit Strategy for Privatized Government Entities

Use capital market to address transparency, corporate governance, risk and public perception issues, while providing public opportunity to participate

Our Recommendation

Simultaneous listing of companies earmarked for privatization at the time they are sold

PPP Underutilization of the Capital Market

USD 56.5b investment required to meet Vision 20:2020 targets in key sectors

Urgent need to attract diverse sources of capital, e.g., companies and funds that have raised capital from the market

Our Recommendation

ICRC should make provisions for listed companies and funds in the ICRC Manual


Click to edit Master title style | Our Role in Achieving the Vision

Assistance in drafting of proposed legislation

Leverage upon our

global counterparts

for best practices

Perform market and

legal research Development of NSE rules to support

proposed bills

Aid in various selection

processes, as necessary

Assist in execution of

closely related

initiatives Assist in determining optimal roll-out structure

Evaluate & issue licenses

to market operators

Grow knowledge

base to support market

expansion

Support appropriate

agency in seamless execution

The NSE can play a vital role in helping

to Achieve the Vision


Click to edit Master title style | Envisioning the NIFC

• The Nigerian International Financial Centre is envisioned to be built and located in a state of the art residential and

commercial city, developed using the latest eco-friendly materials and technologies


Click to edit Master title style | Conclusion

• The NSE is in full support of the proposed bills as we believe the NIFC and Office of the Nigerian Financial Ombudsman will further strengthen the Nigerian economy

• Given our recent track record with advocacy implementation, coupled with our constant cooperation with other global exchanges and organizations, the NSE can bring to bare its expertise and global network in ensuring the proposed legislations are implemented seamlessly

• Accordingly, we have committed resources to this initiative and stand ready to assist in the end-to-end process, as requested



Thank You

Q & A


Thank You

Stock Exchange House

2 - 4 Customs Street

P.O. Box 2457, Marina

Lagos Island, Lagos, Nigeria

[email protected]

Thank You

click to edit master title style - nigerian stock exchange nifc and office... · click to edit...

Documents