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Presented by

Oscar N. Onyema (OON), CEO for

Annual Lagos Business School Alumni Conference

Lagos, Nigeria

November 20, 2014

THE NIGERIAN ECONOMY 2014 Trends & 2015 Outlook

Click to edit Master title style | Agenda

1 • Overview of the Nigerian Economy

2 • Our Global Economic Positioning

3 • The Oil Impact

5 • A More Robust Capital Market

6 • 2015 Economic Outlook

7 • The Road to Economic Empowerment

8 • Conclusion: NSE and the Economy

20/11/2014 The Nigerian Stock Exchange 2

Click to edit Master title style | The Nigerian Economy: A True Growth Story

Nigeria today…The largest economy in Africa and the 26th largest in

the world, with a GDP of $510 billion.

Only 14% of GDP is from the Oil sector, with retail and wholesale trade

being the biggest drivers of GDP growth.

Potential to achieve 7.1% annual GDP growth could make Nigeria a

top-20 economy in 2030, with GDP of more than $1.6 trillion.

Source: McKinsey Global Institute (MGI)

Click to edit Master title style |

-20

-15

-10

-5

0

5

10

15

20

25

30

35

1960 65 70 75 80 85 90 95 2000 05 2010

Nigeria’s Recent Stable Growth Environment

Nigeria’s Real GDP Growth1 (%) – 1960 to 2010

After decades of volatility, Nigeria’s economic growth has been more stable since the early 2000s.

Standard Deviation %

1960 – 2002 9%

2003 – 2010 2%

1 . Data are from prior to the rebasing exercise. Rebased data, available from 2010 onward, includes additional economic

sectors, making comparisons unreliable.

Stable GDP Growth Phase


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Click to edit Master title style | Nigeria’s GDP Rebasing at a Glance

• Following a recently concluded GDP rebasing exercise undertaken by the NBS, with the year 2010 selected as the new base year, the new GDP figures were published on April 6, 2014.

• Accordingly, the estimated size of the Nigerian economy is now at N80.22 trillion ($510 billion) for 2013 compared to N42.39 trillion (~$264 billion) reported pre-rebasing in the preceding year.

• This represents an 89% increase in the reported actual size of the economy as a result of the inclusion of sectors such as telecommunications, aviation, e-commerce and the film industry.

• The services sector has grown to represent approximately 50.2% of the economy, with agriculture’s share of GDP dropping from ~ 40% to ~ 20%.

• Additionally, six sub-sectors (crop production, trade, crude petroleum and natural gas, telecoms and information services, real estate and food, beverages and tobacco) are now responsible for 70% of the nation’s GDP.

• The rebasing dramatically lowers Nigeria’s already healthy debt-to-GDP ratio. Pre-rebasing, this was equivalent to about 22.2% of GDP, but with the new GDP figures, the ratio has fallen to 13.2%.

• The release of the new GDP figures shows that the economy is more resilient and will drive investments in sectors that have now been highlighted as key drivers of the Nigerian economy.

• Compared to South Africa’s market capitalization at 160% of GDP, there is a large upside potential and a lot of room for the growth of Nigeria’s capital market.

Effects of rebasing on Nigeria


Click to edit Master title style | Market Cap Sector Gap Analysis - Post Rebasing

• Market cap as % of GDP (PPP) from ~ 40% to ~ 20% post rebasing. South Africa at 160% of market cap-to-GDP. • Immense gap in capital market as a reflection of the real economy.

Market Capitalisation as at 31th March 2014

11% 15% 3%

13% 14%

2%

4% 7%

31%

8%

11% 1% 4%

3% 30% 17%

17%

30%

2%

11%

2%

40% 22%

1%

Pre-Rebasing Post-Rebasing % of Equity Market Cap

100% 100% 100%

Sector Pre-Rebasing

% of GDP Post-Rebasing

% of GDP % of Equity Market Cap

AGRICULTURE

CONSTRUCTION/ REAL ESTATE

CONSUMER GOODS

FINANCIAL SERVICES ICT INDUSTRIAL GOODS

OIL AND GAS

ALL OTHERS SECTORS


Click to edit Master title style | Nigeria’s Global Positioning – Post Rebasing

POPULATION 2013 (MM)

MIN

T A

ND

NEX

T 1

1

CURRENT GDP 2013 (USD BN) GDP PER CAPITA (USD) 2013 INFLATION (%) 2013

50.0

73.7

77.2

84.6

90.4

99.4

118.3

150.0

174.5

182.5

237.6

South Korea

Turkey

Iran

Egypt

Vietnam

Philippines

Mexico

Bangladesh

Nigeria

Pakistan

Indonesia

BR

ICIS

$153.6

$170.0

$236.5

$272.2

$275.7

$510.0

$548.6

$821.1

$867.5

$1,198.0

$1,327.0

Bangladesh

Vietnam

Pakistan

Philippines

Egypt

Nigeria

Iran

Turkey

Indonesia

South Korea

Mexico

$1,044

$1,295

$1,896

$2,792

$2,800

$3,213

$3,498

$7,207

$10,744

$11,224

$23,837

Bangladesh

Pakistan

Vietnam

Philippines

Nigeria

Egypt

Indonesia

Iran

Turkey

Mexico

South Korea

1.1

3.3

3.5

5.8

7.2

7.3

7.9

8.4

9.2

11.7

29.6

South Korea

Philippines

Mexico

Vietnam

Bangladesh

Turkey

Nigeria

Indonesia

Pakistan

Egypt

Iran

51.8

143.5

201.0

1,210.2

1,354.0

SouthAfrica

Russia

Brazil

India

China

$384.3

$1,824.8

$2,021.9

$2,695.9

$8,227.0

SouthAfrica

India

Russia

Brazil

China

$1,508

$6,076

$7,423

$13,409

$14,095

India

China

SouthAfrica

Brazil

Russia

2.5

5.3

5.8

6.5

9.9

China

SouthAfrica

Brazil

Russia

India



61 45 37

26 24 14 11 8 6 4

39 55 63

74 76 86 89 92 94 96

Kuwait SaudiaArabia

United ArabEmirates

Iran Venezuela Nigeria Russia Mexico China Brazil

Resources Others

Million Barrels of Oil Per Day (2012)

Leading Oil Producers – % of GDP for Resources vs. Others

Nigeria’s economy is relatively diversified when compared with other leading oil producers in developing and emerging economies

Nigeria’s Economic Diversification


11.7 2.8 3.2 3.6 2.5 2.5 10.4 3.0 4.4 2.7

Source: McKinsey Global Institute (MGI): Nigeria resources refer to the oil sector.


Oil Prices – 2007 to 2014

NSE ASI – 2007 to 2014

• Despite the country’s economic diversification away from oil sector, Nigeria remains highly dependent on oil.

• Approximately 75% of federal revenues comes from taxes on the oil and gas sector, and oil and gas makes up more than 90% of exports, providing the critical sources of foreign exchange to support Nigeria’s consumption of imports.

• Additionally, oil revenue ultimately ends up as earnings for individuals, so rising prices contribute to increased consumption and vice versa.

• As the charts on the right illustrate, the capital markets are closely tied to the price of oil.

• The recent downward trend in the NSE ASI in H2 ‘14 can be attributed to the decline in oil prices, amongst other factors.

$20$40$60$80

$100$120$140$160

Jan

-07

Jul-

07

Jan

-08

Jul-

08

Jan

-09

Jul-

09

Jan

-10

Jul-

10

Jan

-11

Jul-

11

Jan

-12

Jul-

12

Jan

-13

Jul-

13

Jan

-14

Jul-

14

0

10,000

20,000

30,000

40,000

50,000

60,000

70,000

Jan

-07

Jul-

07

Jan

-08

Jul-

08

Jan

-09

Jul-

09

Jan

-10

Jul-

10

Jan

-11

Jul-

11

Jan

-12

Jul-

12

Jan

-13

Jul-

13

Jan

-14

Jul-

14

Our Indirect Dependency on Oil


Click to edit Master title style | Our Market is More Resilient

2005 Regulatory Innovation • Digital investor

services

• Easy access to loan facilities

2007 Modernization • Modern electronic

trading facilities

• Significant inflows into the capital market

2009 Crash • Macroeconomic

instability

• Low financial literacy and market discipline

• Inadequate regulatory framework

• Poor governance

• Lack of liquidity

• SEC intervention

2011 Reforms and Beyond • Greater regulatory

oversight

• Product diversification

• Investor education

• Technology

• Improved market structure

• Business development services

• Revised listing rules; amended issuer and broker/dealer rules and penalties

• Information and data

The recent down turn in the NSE ASI in H2 ‘14 cannot be compared with the Global Financial Crisis.

The Nigerian capital market has undergone a transformation of great proportions.


Click to edit Master title style | 2015 Nigerian Economic Outlook

Economic Growth

• Projected GDP growth of above 7%, which is not far-off from historical growth patterns of the Nigerian economy over recent years.

• Oil production expected at 2.25 mbpd in 2015. • Positive Government initiatives to continue - increasing power generation, financial

inclusion, agricultural transformation, and strengthening fiscal discipline.

Election Season

• The International Monetary Fund, IMF, has said that increased focus on campaigns towards 2015 elections is one of the factors likely to divert the world’s attention from issues that would promote the growth of Nigeria’s economy.

Impact of Global Forces

• Retail investors to compose a higher percentage of trading activity on the NSE as smart money pulls out.

• Increased competition from LSE and JSE for Nigerian companies to list. • African exchanges index performance sustainability is in question due to declining

commodity prices, including gold and oil.

Fiscal Policy

• Continued improvement in the banking system may lead to increased lending to the real sector (SMEs).

• Government committed to maintaining fiscal stability. • External reserves expected to remain an issue as commodity prices fall, while the

CBN continues to support the naira.


Click to edit Master title style | The 8 Necessities of Economic Empowerment

Basic Services

Food

Energy

Housing

Drinking water

Sanitation

Health care

Education

Socialsecurity

Insurance to cover income loss based on 2% premium-to-coverage ratio

Daily consumption of 2,100 calories for an adult urban male (2,400 for rural male)

Access to primary and secondary education (or vocational training)

Access to primary care, limited secondary care, and medication, including HIV/AIDS treatment

Improved sanitation facilities that are not shared with other families

60 (rural) or 120 (urban) liters per capita per day of piped water supply

Access to sustainable housing of solid construction

Access to clean cooking fuel, electricity for lighting, petroleum for transportation (in amounts to meet minimum consumption levels)

Nigeria will need to focus on specific areas of empowerment to reach its full economic potential.


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Click to edit Master title style | The Case for Large-Scale Impact In Nigeria

Agriculture

Power

Transportation

Housing

1.5 2.5

4.2 4.4 5.7

58 175

592 880 670

21

101

21 30 40

0.4

1.9

0.4

1.8

0.2

7 19

30 17

30

Key Metric Benchmarks

Maize yield, tonnes per hectare

Megawatt generation capacity per million people

Kilometres of road per 100 square km

Kilometres of rail per 100 square km

Houses per 100 people

Nigeria India Brazil South Africa

China

Nigeria has performance gaps relative to peer developing economies across major sectors. The country trails other countries on many performance metrics. In agriculture, for instance, yields are far below levels in benchmark countries, and Nigeria has one-third of India’s power generating capacity per million people and less than one-tenth of China’s.



Click to edit Master title style | An Opportunity for Growth Inclusiveness

0.52

0.32 0.30 0.30

0.25

0.15

0.05

0.00

0.10

0.20

0.30

0.40

0.50

0.60

Indonesia Botswana South Africa Mexico Ghana Brazil Nigeria

% Point Reduction in Poverty for Every % of GDP growth, 1999–2010

Other rapidly growing countries have successfully converted economic gains into lower poverty rates. Nigeria has a significant opportunity to increase growth inclusiveness as well.





Conclusion: Our Role in the Nigerian Economy

The NSE plays a vital role in the Nigerian economy by: • Providing a robust capital market infrastructure to enable savings to be funneled to investments; • Providing a price discovery mechanism between supply and demand for listed financial products; • Providing a platform for capital raising – for both expansion and exit opportunities; • Ensuring an orderly, fair and equitable marketplace, and protecting the integrity of the market

and investors; and • Providing an avenue for investors (retail, institutional, domestic, foreign) to create durable

wealth.

NSE TOTAL MARKET CAP

94.74

119.41 115.68

0.00

20.00

40.00

60.00

80.00

100.00

120.00

140.00

2012 2013 Q3 '14

USD

Bill

ion

s 5.20

6.09

4.27

0.00

2.00

4.00

6.00

8.00

2012 2013 Q2 '14

USD

Bill

ion

s

An

nu

alized

FPI

8.54

FPI MARKET ACTIVITY

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THANK YOU Questions & Answers

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