DEBT MANAGEMENT OFFICE NIGERIA Elements of the Momentum of Nigerias Financial Services Sector by Dr. Abraham E. Nwankwo Director-General, Debt Management Office, Nigeria April 2009

2 DEBT MANAGEMENT OFFICE NIGERIA OUTLINE A.1.Capital Market: Sovereign Bond Market A.2.Capital Market: Equities B.Banking Sector C.Conclusion

3 DEBT MANAGEMENT OFFICE NIGERIA A. Capital Market A.1 SOVEREIGN BOND MARKET (1) NIGERIA: Progression of the Sovereign Bond Market TENOR Testing Phase Smoothening Phase*Regular Monthly Issuance Phase YEAR - 3-YEAR- 5-YEAR- 7-YEAR- 10-YEAR- 20-YEAR - * During this year, in addition to smoothening to eliminate large fluctuations in weekly issuance of the NTBs, the DMO in conjunction with the CBN restructured part of the existing stock of 91-day NTBs to 182-day & 364-day NTBs.

4 DEBT MANAGEMENT OFFICE NIGERIA SOVEREIGN BOND MARKET (2) NIGERIA: SUMMARY OF FGN BONDS ISSUED FROM 2005 TO 2008 (N Billion)* 2nd FGN Bonds Issued in 2005 Issue AmountSubscriptionAllotment Oversubscription Rate Percentage Allotted 140, , %127.34% 3rd FGN Bonds Issued in , , , %109.01% 4th FGN Bonds Issued in , ,179, , %100.00% 5th FGN Bonds Issued in , , , %95.53% Total1,670, ,131, ,722, %103.13% Note: * Before the regular monthly offers commenced in July 2005, there was a test offer in 2003 of 3, 5, 7, & 10-year Tenors amounting to N150 billion. The subscription amounted to N72.57 as a result of which only N72.57 billion was allotted.

5 DEBT MANAGEMENT OFFICE NIGERIA SOVEREIGN BOND MARKET (3) SECONDARY MARKET: Performance of the FGN Bonds YEARNo. OF DEALSVOLUME (Units)FACE VALUE (N)% Change ,482585,410,867585,410,867, ,2413,947,284,9823,947,284,982, ,13510,090,235,80610,090,235,806, Primary Dealer-Market Maker System was introduced by 2 nd half of 2006: 20 Primary Dealer Market Makers were licensed. Currently, there are 21 primary Dealer Market Makers -16 deposit money banks and 5 discount houses.

6 DEBT MANAGEMENT OFFICE NIGERIA SOVEREIGN BOND MARKET (4) Nigeria: Transformation of the Domestic Debt Stock by Instruments - Dec. 31, 2002 Compared to Dec 31, InstrumentAmount (N billion)% % NTBs FGN Bondsnil 1, Treasury Bonds Development Stocks Total1, ,

7 DEBT MANAGEMENT OFFICE NIGERIA SOVEREIGN BOND MARKET (5) Holder Amount Outstanding% % Central Bank Banks & Disc. Houses , Non-Bank Public Sinking Fundsnil Total1, , Nigeria: Transformation of the Domestic Debt Outstanding By Holder – Dec. 31, 2002 compared to Dec. 31, 2008

8 DEBT MANAGEMENT OFFICE NIGERIA SOVEREIGN BOND MARKET (6) DATA TABLE

9 DEBT MANAGEMENT OFFICE NIGERIA A.2Capital Market: Equities The Nigerian Stock Exchange (established in 1960 as Lagos Stock Exchange), one of the oldest in Africa – a private sector company. Has 10 trading platforms across the country Regulated by the Securities and Exchange Commission. Has Dual Listing agreements with the Johannesburg Stock Exchange, Ghana Stock Exchange and the Bourse in Cote DIvoire. One of the fastest growing in the world: All Shares Index grew from 6,992.1 in 1996 to 62,700 by April Automated trading, seamless, on-line technology across all the trading floors. Supported by automated Central Securities Clearing System (CSCS). Beyond the worldwide capital Market Crisis: strong prospects because of the underlying opportunities in the real sector of the countrys economy which remain largely un-exploited. 9

10 DEBT MANAGEMENT OFFICE NIGERIA b.Banking Sector Structure Universal Banks (24) with 22 listed on the Nigerian Stock Exchange (NSE) Discount Houses (5), ownership dominated by Universal Banks. Primary Mortgage Institutions - Many with 3 listed on the NSE. Micro-finance Banks: relatively new. Strength of Universal Banks Before January 2006, 89 in number; minimum capital requirement was N2billion but after January 2006: when minimum capital requirement became N25 billion, 25 resulted from mergers and acquisitions (two consolidate banks later merged to bring the current number to 24) 5 are among the Top 10 in Africa. Some are ranked among the Top 1000 in the world. Total Capitalization as at March, 2008 (before the Global Financial Crisis): N12.640trillion International Presence: 5 now operate in the UK; some have subsidiaries in Ghana, Cote DIvoire, Sierra Leone, Gambia, Zambia, Uganda and South Africa. Access to International Capital Market: In 2007 GTB and First Bank sourced USD350 bln and USD175 bln, respectively, from the ICM -Diamond Bank and Access Bank have raised equity capital through GDRs. 10

11 DEBT MANAGEMENT OFFICE NIGERIA C.CONCLUSION Nigeria has a strong and rapidly growing financial Services Sector. Rapid and strong growth of the resuscitated Sovereign Bond Market provides an invaluable synergy with the already-developed Equities Market and the very dynamic Banking Sector Combined with a diversity of potentials in the real sector – agriculture, manufacturing, solid minerals, energy, transportation etc, the rapidly transforming financial services sector provides a good environment for investors. 11