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Presented by
Mr. Bola Adeeko
Head of Corporate Services Division, NSE for
THE NATIONAL DEFENCE COLLEGE
Abuja, Nigeria
November 5, 2013

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• Promoting economic stability is partly a matter of avoiding economic and financial crises. It also means avoiding large swings in economic activity, high inflation, and excessive volatility in exchange rates and financial markets.
• Instability can increase uncertainty and discourage investment, impede economic growth, and hurt living standards. A dynamic market economy necessarily involves some degree of instability, as well as gradual structural change.
• The challenge for policymakers is to minimize the instability of their own country and others without reducing the economy’s ability to raise living standards through higher productivity, efficiency, and employment.
• Economic and financial stability is both a national and a multilateral concern. As recent experiences in world financial markets have shown, countries have become more interconnected.
• Problems in one apparently isolated sector, can result in problems in other sectors, and spillover across borders. No country is an “island” when it comes to economic and financial stability.
Source: International Monetary Fund (IMF) - http://www.imf.org/external/np/exr/facts/globstab.htm
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• A country's financial system includes its banks, securities markets, pension and mutual funds, insurers, market infrastructures, central bank, as well as regulatory and supervisory authorities.
• These institutions and markets provide a framework for carrying out economic transactions and monetary policy, and help to efficiently channel savings into investment, thereby supporting economic growth.
• Problems in financial systems not only disrupt financial intermediation, but they can also undermine the effectiveness of monetary policy, exacerbate economic downturns, trigger capital flight and exchange rate pressures, and create large fiscal costs related to rescuing troubled financial institutions.
• Moreover, with increasing connectivity among financial institutions, and tighter financial and trade linkages between countries, financial shocks in one jurisdiction can rapidly spill over across financial sectors and national borders.
• Therefore, resilient financial systems that are well-regulated and well-supervised are essential for both domestic and international economic and financial stability.
Source: International Monetary Fund (IMF) - http://www.imf.org/external/np/exr/facts/banking.htm
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United States
The U.S. economy remains at the center of events. Private demand continues to be strong, although growth has been hobbled this year by excessive fiscal consolidation. Politics is creating uncertainty about both the nature and the strength of the fiscal adjustment.
Europe
BRICS
Emerging Economies
(with a focus on Sub-
Saharan Africa)
The core economies of Europe show some signs of recovery. This is the result of a change in mood, which nonetheless, could be largely self-fulfilling if consumers and firms decide to increase spending.
For some time, global growth has been boosted by the BRICS—Brazil, Russia,
India, China, and South Africa. But over the past couple of years, growth in these economies has begun to sputter, raising some fundamental questions. Why have the BRICS simultaneously slowed? Are the slowdowns merely cyclical or are they structural, with more profound implications for the global economy?
According to the International Monetary Fund Chief, “Moreover, in the threespeed global recovery now underway, the developing countries are leading the pack. After Asia, Sub-Saharan Africa is currently the second-fastest growing region.”
Source: International Monetary Fund (IMF) - World Economic Outlook, October 2013
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• As a result of Quantitative Easing (QE) in the United States, leading global exchanges are experiencing a growth sprout in total market capitalization due to more money in circulation.
– Nigeria has received approximately $4.4Bn in Foreign Portfolio Investments (FPI) as at the end of Q3 ‘13.
– The country accounted for 28% of Africa’s FPI in 2012.
• Nevertheless, it may be time for monetary policy to make plans for an exit from both quantitative easing and zero policy rates.
• While there are no major conceptual or technical issues involved, the communication problems facing the Federal Reserve are new and delicate. It is reasonable to expect some volatility in long rates as the
US Federal Reverse’s policy shifts.
• Although there have been a short term resolution to the ongoing government spending battle in the
US, conflicts around increasing the debt ceiling over the next 3 months could lead to another bout of destabilizing uncertainty and lower growth.
• It is projected that fiscal policy will tighten less in the advanced economies in 2014 and stay broadly neutral in emerging market and developing economies. Among advanced economies, the pace of tightening will fall off appreciably in the euro area and the United States.
• However, this will be partly offset by tightening in Japan. Public debt will remain very high in the advanced economies in the medium term, while declining to about 30 percent of GDP in the emerging market and developing economies.
Source: International Monetary Fund (IMF) - World Economic Outlook, October 2013
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• The United States may soon move to less accommodative monetary policies and higher long-term interest rates as its recovery gains ground.
• The primary challenge resulting from this change relates to managing the side effects and eventual withdrawal of accommodative monetary policy.
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• BRICS member countries continue to work towards tangible results on the initiatives on BRICS Development
Bank and Contingency Reserve Arrangement (CRA).
• The euro area is moving toward a more robust and safer financial sector, including a stronger monetary union with a common framework for risk mitigation, while strengthening financial systems and reducing excessive debt levels.
• There is still a lot to be done to improve financial reforms in Africa. However, in the last decade, there has been substantial progress.
• A major contribution to these achievements has been the sustained work of the Collaborative Africa
Budget Reform Initiative (CABRI) – a network of senior budget officials working in African ministries of finance.
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2%
1%
0%
5%
4%
3%
3.18%
Global inflation to outpace
3.98% global GDP until 2014
3.76%
3.59%
2.87%
3.76%
3.96%
2012 2013E 2014E
Global GDP (%)
3.58%
4.07%
3.50%
2015E 2016E
Global Inflation (%)
Source: International Monetary Fund (IMF)
4.11%
3.51%
2017E
4.12%
3.52%
2018E
Emerging/Developing Economies to outpace Advance Economies by 2 times over the next 5 years
6%
5.40% 5.46% 5.53%
5.07% 5.35%
4%
4.92%
4.55%
2.60% 2.58%
2.03%
2.48% 2.49%
2% 1.47%
1.17%
0%
2012 2013E 2014E 2015E
Emerging market/developing economies GDP (%)
Source: International Monetary Fund (IMF)
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2016E 2017E 2018E
Advanced economies GDP (%)
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$110
$105.01 $104.49
$101.35
$100
$90
• Crude oil prices projected to decline over the next 5 years
$80
2012
Source: International Monetary Fund (IMF)
2013E 2014E
$95.33
2015E
• Traditionally, emerging market/developing economies tend to rely less on Gov’t revenues to bolster their economies (please see chart below).
• Thus, the impact felt in the economy from a decline in
Gov’t revenues do to reduced oil prices may be limited.
$91.23
2016E
$88.51
2017E
$86.66
2018E
Emerging/Developing Economies to rely less on Government revenues to stabilize their economies.
40%
37.44% 37.71% 37.68%
30%
35.97%
28.32%
37.11%
27.59% 27.50%
37.75% 37.81%
20%
27.28% 27.02% 26.85% 26.77%
10%
0%
2012 2013E 2014E 2015E 2016E 2017E 2018E
Advanced economies
Source: International Monetary Fund (IMF)
05-Nov-2013
Emerging market/developing economies
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• Food price inflation in India and China (two key BRICs) has been high, and while both countries are pursuing tightening measure little has been accomplished.
• The Chinese government is in danger of not living up to economic stability and growth promises. If inflation was to rise even higher, China's rural population may move against the government, forcing dramatic actions.
• Although the Eurozone has made substantial progress in terms of financial reforms over the past two years to lower it’s debt profile and market risk, its economic is still fragile.
• With top economies like France and Spain still weak on the debt and labor side, if additional problems arise , the euro area could be in for more trouble.
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• Tightening in China has led to massive spikes in SHIBOR, the Shanghai Interbank Offered Rate. This indicated that banks, companies, and government sponsored companies could be in trouble.
• If a company or bank was to default on its debt obligations, it is unknown how Chinese markets would react.
• The Korean Peninsula has been tense over the past two years due to ongoing rhetoric between North Korean and
South Korean. There has also been tension between China and Japan in recent times.
• Although the perceived tension in Korea has been subdued in recent times, the potential for the escalation of conflict remains in the region.
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• As every economy in the world attempts to build an export-led recovery, countries are using their printing presses to devalue their currencies as a means to compete.
• But if the world is to show signs of contraction, nations may become more aggressive and shift from a currency war to protectionist trade policy.
• Oil prices may have more to do with the health of the global economy than realized. Some say it was the trigger that caused the recession we just escaped.
• Although oil prices are projected to decline over the next 5 years, history has shown that a sudden catastrophic event, such as hurricanes/tsunamis or global warfare, can send oil prices sky rocketing.
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• High level of debt has become an issue for the US Gov’t, causing a recent shutdown, and conflicts over government spending.
• Markets have reacted to this uncertainty, sending U.S. treasury yields higher, further endangering the health of the U.S. government balance sheet.
• Home prices in the US have been rising rapidly recently, to the point where there is talk as to whether the nation is entering into another housing bubble.
• A recent survey by the New York Times suggest that although the US is not in a bubble now, the US may heading towards one. Such a decline would inhibit some of the economy's most reliable spenders endangering the consumer outlook and, in turn, the U.S. recovery.
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• Emerging economies are, to some degree, playing catch-up with investment, as strong existing infrastructure in mature economies gives their businesses a huge advantage.
• More than a fifth of BRICS businesses cite the poor quality of local transport (21%) and information and communications technology (ICT) infrastructure (21%) as likely growth constraints in 2013.
• China could be in store for a hard landing, if it engages in too heavy handed policy-tightening to combat inflation in the country. Societe Generale gives this scenario a 30% chance of happening.
• The result would be a slow down in what has become the world economy's second engine. There is no telling what the contagion would look like, and whether it would create a recession in the U.S.
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Oil Price Volatility
Inadequate
Infrastructural and
Human Development
Inadequate
Government Attention to the Capital Market
Lack of Respect for the
Rule of Law
Discountinuity in
Government Policies
High Import
Dependence
Insecurity
The Nigerian Stock Exchange 18

| Africa’s Infrastructure Challenges
ELECTRICITY CO`NSUMPTION PER CAPITA, KW/Hr
South Africa
Libya
Sey chelles
Mauritius
Botswana
Namibia
Eqypt
Tunisia
Gabon
Swaziland
Zimbabwe
Algeria
Zambia
Morocco
Mozambique
Djbouti
Ghana
Cameroon
Cote d'Ivoire
Congo
Togo
Angola
Kenya
Nigeria
Losotho
141
0 1,000 2,000 3,000 4,000 5,000
10
5
0
AFRICA ROAD NETWORKS (KM/1,000 INHABITANTS)
25
20.1
20
15
7.7 7.4
2.1 1.8
1.8 1.3
AFRICA’S BANDWIDTH SHORTFALL
30
24.7
25
20
15
10
5
0
8.05
0.01
Source: CIA Fact Book; data as of 2009
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| The Nigerian Banking Sector
2005 Consolidation
• Regulator-driven
(N25b min. capital requirement)
• 25 banks from 89
2007 Expansion
• Focus on stronger capital base
• Regional expansion
• Higher exposure to the capital market
2009 Crisis
• Stock market crash
• Increase in NPLs
• CBN assessment of banks (corporate governance, capital adequacy, liquidity, risk management)
• CBN intervention
2011 Reforms
• Nationalization of banks and M&As
• Greater regulatory oversight
• Divestment from non-core banking businesses
• Introduction of
NUBAN
• Improved competitive environment (focus on profitability and earnings sustainability)
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| The Nigerian Capital Market
2005 Regulatory
Innovation
• Easy access to loan facilities
• Increased Margin
Lending
2007 Modernization
• Modern electronic trading facilities
• Significant inflows into the capital market
2011 Reforms
• Greater regulatory oversight
2009 Crash
• Macroeconomic instability
• Product diversification
• Investor education
• Technology
• Low financial literacy and market discipline
• Improved market structure
• Inadequate regulatory framework
• Business development services
• Poor governance
• Lack of liquidity
• SEC intervention
• Revised listing rules; amended issuer and broker/dealer rules and penalties
• Information and data
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Total GDP: USD243.98 billion (2012)
Real GDP Growth (%) : 6.2% (Q2 ‘13)
Inflation (%): 8.0% (Sep ‘13)
External Reserves: US$45.7 billion (26 Sep ‘13)
External Debt: US$6.920 billion (Jun ‘13)
Total Population: 174.5bn (Jul ‘13 est.)
Main stock markets: NSE (Sep ‘13)
– N17.72tr (US$114.16bn) Total market cap
– N11.66tr (US$75.08bn) Equities market cap
Resources:
– Oil & Gas (2 nd largest oil reserves in Africa;
10 th largest in the world)
– Mining: coal, minerals, precious metals
– Commodities: agriculture, timber, rubber
Industries:
– Leather, textiles, cement, fertilizer
Best Performing Sectors: (Q2 ‘13)
– Agriculture (40.1% of GDP)
– Wholesale & Retail Trade (17.3%)
– Crude, Petroleum & Natural Gas (12.9%)
– Telecommunications (8.4%)
– Others (6.7%)
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TUNISIA
MOROCCO
ALGERIA
WESTERN
SAHARA
LIBYA
EGYPT
MAURITANIA
CAPE VERDE
MALI
NIGER
SENEGAL
ERITREA
CHAD
GAMBIA
GUINEA-BISSAU GUINEA
BURKINA FASO
BENIN
Ghana
IVORY
SIERRA LEONE
COAST
TOGO
LIBERIA
NIGERIA
EQUATORIAL GUINEA
SÃO TOME & PRINCIPE
CENTRAL AFRICAN
CAMEROON REPUBLIC
REPUBLIC OF
CONGO
GABON
SUDAN
UGANDA
RWANDA
BURUNDI
DEM REP
CONGO
ETHIOPIA
Kenya
TANZANIA
DJIBOUTI
SOMALIA
Angola
ZAMBIA
ZIMBABWE
NAMIBIA
BOTSWANA
COMOROS
MALAWI
MOZAMBIQUE
MAURITIUS
MADAGASCAR
The Nigerian Stock Exchange
SOUTH AFRICA
SWAZILAND
LESOTHO
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GDP Growth (%)
7.5%
7.0%
6.5%
6.3%
6.5%
6.0%
5.5%
7.0%
6.6%
6.2%
5.0%
Q2 '12 Q3 '12 Q4 '12 Q1 '13 Q2 '13
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Recent Economic Trends
Nigeria
• Q2 2013 GDP growth rate of 6.2% percent as against 6.3% percent in the corresponding quarter of 2012, and 6.99% in the fourth quarter of 2012
• Inflation declined to 8.0% in September 2013, slightly from the 8.2% recorded in August
2013. This is the ninth consecutive month of single digit year-on-year rates being recorded
• Monetary policy remains tight – High MPR of
12%
• External Reserves drops to $45.70bn in
September from $48.86bn recorded in May
2013
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Economic Growth
Fiscal Policy
Lower Inflation
Levels
Impact of Global
Forces
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• Projected GDP growth of 6.2% according to the IMF (as at October 2013), which is not far-off from historical growth patterns of the Nigerian economy over recent years.
• Positive Government initiatives to continue - increasing power generation, financial inclusion, agricultural transformation, and strengthening fiscal discipline.
• Expect primary growth in agriculture and industrial sectors.
• 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 steady.
• Inflation is expected to maintain some level of stability throughout the year.
• The non-accommodative policy stance by the Central Bank, which targets single-digit inflation, is expected to promote inflation stability.
• Retail investor s to compose a higher percentage of trading activity on the NSE.
• Nigerian companies courted to list on developed exchanges – big pull by LSE and JSE.
• African exchanges still seeing exceptional growth (Ghana composite up 75.42% YTD and
NSE ASI up 33.95% YTD).
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• Incentivisation to encourage increased listings on The NSE
• Government divestment through The Exchange
(Discos, Gencos, IPPs)
To develop a vibrant capital market, reflective of the economy
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• Consistent policies to encourage and support local production of substitutes to imported commodities
• Monetary and Fiscal policies to stabilize the economy
Enact policies to promote economic development
The Nigerian Stock Exchange
• Investment to support critical infrastructural development
• Human capital development
• Support job creation in strategic sectors of the economy
Drastic reduction in cost of governance and increased investment in the economy
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• Government is biggest spender in the economy, hence its should utilize the capital market for economical development.
• To channel spending/co-financing of projects through the capital market.
• To create measures that will ensure listing of privatised power entities, Telcos and other large cap companies.
• Encourage the investment of a portion of the
SWF in the capital market.
• To approach the capital market for projectspecific infrastructural bonds.
• Availability of long term capital required for the development of the private sector.
• Companies to access long term debt or equity capital to finance development and expansion.
• Innovative financing for major infrastructural development.
• Increased participation by large cap companies in the capital market, especially in sectors insignificantly represented by the capital market (e.g. Utilities at 0%).
• Increased liquidity through the capital market.
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1960
The Nigerian Stock Exchange
(NSE) was founded as the
Lagos Stock Exchange
1980s
Focus on increasing corporate governance in the market, on the back of international exposure via Reuters
1990s
The IPF is operational; policy is enacted to encourage foreign participation; and the
Exchange automates trading
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1961
Trading began with 19 listed securities - 3 equities, 6 Gov’t bonds and 10 corporate bonds
1970s
The Lagos Stock Exchange becomes the NSE and several branches (with trading floors) are opened across Nigeria
2000s
Modernization, strong GDP growth, an influx of local/ foreign participation ignite the market; weak regulatory practices rupture the market
• Since its inception, the NSE has assisted corporations with raising capital through the issuance of equity and fixed-income products
• The NSE has provided a platform for the
FGN, individual States and Local
Governments, and other government entities to raise funds for various types of projects through the issuance of debt
• The NSE is positioning to become “the
Gateway to African Markets”
• To achieve this, the Exchange has embarked upon a transformation program to compete effectively in the global marketplace, while meeting the changing needs of our clients, and facilitating the mid- to long-term financing needs of the nation
The Nigerian Stock Exchange 29

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Primary market for the issuance of newly listed securities
Secondary market for the trading of
Provide market data and transparency
Regulate members and participants
Monitor the market
Protect investors
 The NSE plays a vital role in the Nigerian capital market by:
 Providing a pricing mechanism between supply and demand for productive activities
 Providing a platform for capital raising including privatization and exit opportunities.
 Authorizing and monitoring market operators.
 Providing a robust capital market infrastructure and trading platform.
 Ensuring a orderly, fair and equitable market place by protecting the integrity of the market and investors from market manipulation.
 Providing a medium of exchange for retail and institutional investors to build and preserve wealth, while maintaining a robust Investor Protection Fund.
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Strong Global Performance (H1 ’13)
70.00%
60.00%
50.00%
40.00%
• H1 ‘13 performance shows the DJIA performing at 13.78%, reflecting the impact of the US’s QE stimulus
• Although QE is driving performance of US capital markets, the
Nigerian market is being driven more and more by local investors
• As QE is phased out, global investors may seek to cover positions in their respective local markets which may impact Nigeria in terms of foreign investors looking to sell down
• Performance in the Euro zone, as reflected in the FTSE AIM, is still sluggish as a result of the lingering debt crisis
• Globally, Nigeria remains one of the most attractive markets
30.00%
20.00%
10.00%
0.00%
-10.00%
-20.00%
-30.00%
Ghana
Comp.
Nigeria ASI Nairobi SE DJIA S&P 500 SEMDEX NASDAQ
Composite
FTSE 100 FTSE/JSE FTSE AIM MASI Hang Seng WIG 20 EGX 100 IBovespa
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| The Nigerian Capital Market Today
2010s
Reforms take hold in the
Nigerian capital market: growth-enabling market structure; stronger regulatory environment; targeted business development efforts; 21 st century technologies; first-rate investor protection programs; market development and improved operational efficiency
$1 Trillion
Market Cap
• Exchange-driven reforms have strengthened the market, e.g., regulatory oversight is stronger, the market is more efficient, and investors can count on a higher level of protection
• The Exchange is focused on establishing technology competitiveness, and is advocating policy changes necessary to enable the Nigerian capital market absorb the forces of change
• The Exchange is facilitating the creation of
‘African Business Champions’ of tomorrow
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Moving with the Times
• The securities industry is largely driven by technology, whereby the ability to develop a focused strategy for the utilization and deployment of resources is critical.
• Support for new technology-driven trading approaches is key.
• Utilization of data (including those from social media) to develop automated trading strategies and enhanced risk management is now mainstream.
• Trading venues, regulators and regulated entities need to keep abreast of trends to make markets more transparent and fairer for investors and participants.
• Speed and robustness of technology systems are now critical success factors of modern trading venues, underpinning the achievement of scale economics.
• Key Industry trends include, but are not limited to:
– Mobile / E-trading
– Co-hosting and Co-Location
– Technology-enabled trading models
– Reduction in latency and increases in order book capacity
– Market surveillance technology
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• Imbalance between supply and demand, and oversubscription of quality listed companies.
• Inadequate talent pool in the region to support rapid growth.
• Effective information dissemination.
• Sufficient legal due process and protection.
• Sufficient due diligence by market players.
• Relatively few listed companies when compared to regions like China and India.
• Low liquidity.
• Government policy.
05-Nov-2013 The Nigerian Stock Exchange
• Clear delineation and segregation of responsibilities between capital market operators.
• Robust regulation and risk-based supervision.
• Greater enforcement of laws, rules and policies.
• Cultivation of strong and extensive network of domestic talent.
• Greater array of products and services.
• Good corporate governance.
• Quality new listings.
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Term
2012 2011 2013 – 2014
- Market Segmentation 
- Company Share Buy-Back 
- Introduction of ETFs 
- Investor Clinics 
- New Web Site 
- Revised Listing Rules 
- Market Making (approved) 
- Securities Lending (approved) 
- Short Selling (approved) 
- Enhancement of Regulatory Programs 
- Financial Literacy Program 
- IFRS Compliance 
- Market Data Services 
- Advocacy 
On-going
- Develop Product Liquidity and Depth 
- Attract and Retain More Listings 
- AMCON Debt Resolution
- Advocacy
05-Nov-2013

 - Review PFA Investment Guidelines 
- Tax Breaks on Transaction Fees 
- Exit Strategy for Privatized Entities 
- Broker Margin Debt Resolution 
- Broker Access to Funding
The Nigerian Stock Exchange
- ASeM Re-Launch 
- X-Issuer Portal 
- CSR Program 
- Delivery of X-Gen 
On-going
- Product Innovation (e.g. ETFs, NDRs) 
- Coop with Other Exchanges & Global
Orgs 
- Policy Advocacy 
- Demutualization 
- Derivatives Feasibility Study
- Transaction Cost Analysis
- Enhanced Rulebook
- Whistle Blowing Program
- Market Optimization
- Operation of Investor Protection Fund
- Automation of Transaction Lifecycle
- Policy on Large Cap Firms
- Access to SWF Funds
- Reduce Focus on Dividends
- Capacity of Local Institutional Investors 
(on-going)
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SECTOR
AGRICULTURE
CONSUMER GOODS
OIL AND GAS
ICT
OTHERS
INDUSTRIAL GOODS
CONTRIBUTION TO
GROSS DOMETIC PRODUCT
40.06%
17.32%
12.90%
8.37%
10.43%
3.98%
FINANCIAL SERVICES
CONSTRUCTION/REAL ESTATE
3.95%
2.39%
SERVICES 0.60%
TOTAL 100%
05-Nov-2013
• Market Cap as % of GDP (PPP): 21%
• Huge gap in capital market reflecting the economy
The Nigerian Stock Exchange
CONTRIBUTION TO
EQUITY MARKET CAP
0.73%
30.26%
2.09%
0.56%
2.38%
31.26%
30.42%
1.83%
0.47%
100%
Market Capitalisation as at 30 th Sep 2013
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3 rd Largest Exchange in Africa by Market Cap *
Approx. 5 million investors: *
Local YTD – 49.13% of market activity
Foreign YTD – 50.87% of market activity
Avg. daily value traded YTD (N4.42b, $26.87m)
Avg. daily volume traded YTD (424.24m)
234 Active dealing member firms
48 Dealing members/Issuing houses
20 Ordinary members/Issuing houses
Equities and products: †
Total Market Capitalization (N17.72t, $114.16b)
196 listed equities (N11.66t, $75.08b) and
189 operating companies;
57 bonds (N5.98t, $9.07b)
1 ETF (N311.40m, $2.01m)
Founded in 1960
14 electronic trading floors around Nigeria
• Data/figures as at the end of Aug 2013
† Figures as at September 30, 2013
The Nigerian Stock Exchange 37 05-Nov-2013

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