1. www.afrinvestwa.com 1 1 Recent Developments in African Capital Markets – The Nigerian Case October 29, 2007 Discussion Notes By: Godwin Obaseki

2. Recent Development In African Capital Markets Page 2 FDI & Portfolio Inflows Ingredients for Success: Improved international credit ratings, as has been the case in Nigeria Commitment to reforms, liberalization and private sector participation; as has been the case in Egypt Stability in macro-economic and political affairs, as has been the case in South Africa and Nigeria Robust external indicators, including high external liquidity and declining public external debt, as we have seen in Morocco and Nigeria Across Africa, recent evidence suggests that achieving substantially increased levels of FDI and portfolio inflows is possible, given the right domestic environment.

3. Recent Development In African Capital Markets Page 3 GDP Growth 2001- 2007 in Nigeria Robust macro- economic growth continues to be a key driver of stock market performance National GDP growth (2006 GDP: US$117m) at over 5.0% since 2003, forecast at 7.9% in 20072; New Goal is to achieve 13.5% GDP growth rate between 2007 - 2020 2 Central Bank of Nigeria (CBN) forecasts

4. Recent Development In African Capital Markets Page 4 Non Oil Sectors Leads GDP Growth Non-oil sector growth far outstrips the troubled oil sector with estimates at over 10% growth in 2006, albeit from a small base Local interest rates have continued their downward trend, with inflation now estimated at 8.0%, as exchange rates remain stable

5. Recent Development In African Capital Markets Page 5 External Debt Plunges High oil prices and fiscal discipline basis for restructuring of the nation’s balance sheet Nigeria’s new status as an almost debt free nation, currently rated BB- by Fitch and S&P is helping drive growth Total external debt now comes to about US$3bn, in a country with external reserves of over US$43bn (as at April 2007)

6. Recent Development In African Capital Markets Page 6 FX Rates Stabilizes Some of the FX stability may be attributed to high global oil and commodity prices, and the recent slide in the value of the dollar Much of this forex stability can however be put down to consistent macro- economic management by the Central Bank of Nigeria

7. Recent Development In African Capital Markets Page 7 Increasing Market Capitalization Since 1998, market capitalization has grown at a compound annual growth rate (CAGR) of 46%, from about US$2bn to over US$62bn as at August 2007 Over that same period, the number of listed companies has increased by only 12%, from 186 to 208 companies.

8. Recent Development In African Capital Markets Page 8 Improved Liquidity  The total value of trades executed on the Nigeria Stock Exchange (NSE) has grown at a CAGR of 50% since 1998- to about US$3.7bn in 2006 and US$2.9bn as at April 2007.

9. Recent Development In African Capital Markets Page 9 31-Dec- 96 31-Dec-01 % chg 1996 - 2001 31-Aug-07 %chg 2001- 2007 NSE All Share Index6,992.1010,963.115750,291.09359 Market Cap (Nbn)26.04648.441497,819.721106 Ann. Market Turnover (Nbn)5.8256.978791,996.61*3405 Market PE ratio (x)10.0813.353325.6792 Market Div.Yield (%)5.284.73(11)2.0(58) Number of Listed Companies18319462087 CBN EX Rate (N/$)801134212712 An Impressive 10 year Bull Run

10. Recent Development In African Capital Markets Page 10 A sizable bond market emerges In a very short period, over US$ 6.3bn in sovereign bonds of varying maturities have been issued, leading to an emerging yield curve.

11. Recent Development In African Capital Markets Page 11 Summary Increased listings, including cross- boarder e.g GDRs Wider issuer and investor base/ Regional expansion Increasing market liquidity and improving trading infrastructure More stringent requirements for operators Improving reporting and disclosure standards Nigeria Capital Markets Reduction in trading costs and extended trading hours

12. Recent Development In African Capital Markets Page 12 But what can slow down progress? Uncertainty in political affairs, crime, poverty and corruption; as we have seen in South Africa and Nigeria Low per capita output and large poor populations, as is the case in Nigeria, Kenya and Senegal Government and regulatory restrictions on private capital flows, increasingly less so across the continent Low levels of infrastructural development, as is still the case across much of sub-Saharan Africa However, various obstacles to growth continue to exist in both Lion and Cub countries.