3RD ANNUAL NIGERIAN CAPITAL MARKETS WORKSHOP November 21, 2012 DEVELOPMENTS ACROSS THE NIGERIAN CAPITAL MARKETS

By: Haruna Jalo-Waziri, Executive Director, Business Development

Introduction First, I would like to express my sincere gratitude to JP Morgan for inviting me here to give the keynote address at this 3rd Annual Nigerian Capital Markets Workshop. On behalf of the Nigerian financial community and The Nigerian Stock Exchange (NSE), I am honored to have the opportunity to share my thoughts with this constituency, with whom the Exchange shares a common vision for the growth and development of the Nigerian capital markets. My CEO was invited to this event last year during which he spoke about several key initiatives the Exchange would pursue in the short and medium terms to enhance market liquidity and depth, as well as to strengthen our regulatory framework. Since he arrived at The Nigerian Stock Exchange in April 2011, our goal has been to restore investor confidence in the market. Today, as we review the progress we have made over the past year, it is important to highlight how these key initiatives have helped reignite interest and participation in our capital markets. Firstly, let me draw your attention to what has transpired of late. The implementation of our vision and strategy over the past 18 months, coupled with the economic developments we are experiencing as a nation, have led to a laudable increase in total market capitalization, to the tune of 38% as at the end of October. While we view this as a considerable amount of progress and a sign of the return of Nigerias capital markets vibrancy, we still have a relatively long road ahead. To enable the market sustain (and increase) the momentum it has recently experienced, the successful implementation of our mediumand long- term strategic initiatives remains a priority. If we are to continue to build upon the strengths of the Nigerian capital markets and ensure a truly fair and orderly market, then we must continue to do so with a global perspective, realizing that Nigeria is a true force in the global financial marketplace. On that note, today, I would like to focus on three primary areas:

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1) the current status of Nigerias capital markets; 2) reasons for why we are where we are, and the vision for the future; and 3) how we are capitalizing on the lingering global financial crisis. 1. The current status of Nigerias capital markets Over the past year, the Exchange has made great strides in its commitment to providing a worldclass capital market experience, and to improving its service excellence. We have undertaken major reviews of our market and operations and implemented innovations required to deliver a robust and efficient capital market. The NSE has successfully delivered on key strategic initiatives to create an African institution that competes effectively in the global marketplace. These initiatives were aimed at developing a more transparent, liquid and accessible market with a modern market structure to support the delivery of a wider range of investment products. By implementing these initiatives, as well as engaging investors, our listed companies, market operators, the regulator, and prospective issuers who had lost faith in the capital market, we are moving in the right direction. As at the end of October, the NSE All Share Index (ASI) had risen 29%, while the NSE 30 grew a commendable 35%, and market capitalization for the secondary bond market increased by 52%. To put these figures in perspective, we should take a global view, and look at other developed and emerging market competitors. In the same period ending October, the DJIA posted a six per cent rise, the NASDAQ Composite recorded a 12% increase, and the FTSE 100, a 4% bump. As it relates to regional competitors, the Nairobi Stock Exchange ASI is up an impressive 68%, the EGX 100 returned 37%, and the FTSE/JSE ASI, a modest 16%. What I had hoped to illustrate is that the growth we are experiencing in our market is, at worst, on par with other emerging markets in our region and, at best, exceeds the performance of other developed markets. Upon further analysis of the global competitive landscape, it is important I touch upon a sensitive matter that is affecting our local market the flight to developed markets for listing. While

companies should have the ability to list their shares wherever they choose, based on their objectives, I urge Nigerian companies to reconsider raising capital outside Nigeria.

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The days of seeking status by listing in a developed market are slowly waning. As developed markets struggle through the lingering global financial crisis, records show that IPOs are moving to emerging markets. The NSE is among the many emerging markets focused on building local liquidity, exploring the potential of regional hubs, and looking to attract foreign listings. This focus complements a key trend we are seeing by companies in developed economies looking to tap into rising demand from emerging markets. These companies see the value in building brand recognition through an IPO, on the stock exchanges of their target markets. So, I call on Nigerian (and African) companies looking to raise capital in the developed economies, to look at the upside of building a brand in the markets that account for the largest and most-rapidly growing share of their revenue; in our case, Nigeria. 2. Reasons why we are where we are, and the vision for the future As the Nigerian Stock Exchange moves towards becoming more globally competitive, the bourse is adopting the highest level of corporate governance principles, and our Zero Tolerance policy will remain a primary condition for participation in our market. To address market depth, we are introducing new products into the market and providing services that are on par with those provided by the largest exchanges in the world. We kicked off 2012 with West Africas first exchange traded fund (ETF), followed by the introduction of market making, and the announcement of short selling and securities lending, which will commence shortly. This is the type of market structure, coupled with strong regulatory principles, that will enable us reach the heights we are working very hard to attain. To enhance the investor experience, we have embarked on an incredible feat to implement 21st century technology, supported by updated processes that market participants all over the world can appreciate and exploit. From a new Website with a real-time live feed to a ticker, to X-Net, a new virtual private network (VPN) to enhance connectivity to the exchanges trading systems (20x faster), we are revamping the Nigerian capital market into a modern establishment that can compete with the most successful exchanges in the world. For the first time in our history, our business development efforts to attract and retain top quality companies have resulted in revised listing rules, systematic sector, board and product marketing strategies, and value-added services to address specific concerns hindering market growth. While our focus has been on cleansing, restructuring and making the market more accessible, in the next year, the Exchange will continue with innovations centred on technology and product
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development, as well as on increasing our investor base, a world-class investor protection programme, and on IPOs/new listings. We will operate best-in-class technology-based solutions, offer advanced data services, and continue advocating changes to policy, with the aim of transforming the Nigerian capital market into the gateway to African capital markets. As a result of several initiatives the NSE has already successfully executed, plus other external forces beyond our control, the market is rebounding at a healthy, steady and fundamentally sound rate. But we must also give credit where credit is due: to the Federal Ministry of Finance for supporting the development of the capital markets by addressing growth issues; to the CBN for intervening in the Nigerian banking crisis and the subsequent resolutions that were concluded in 2011; to AMCON, which is committed to working with the appropriate regulatory authorities to safeguard the banking and capital market segments; to the Securities and Exchange Commission (SEC) for its IOSCO-guided determination to regulate our market; and to all other Regulatory authorities that are raising the bar to ensure Nigerias realization of the Vision 20:2020 mandate, and other official programmes that support the nations march towards real development. So, what does this mean for the future of the Nigerian capital markets? To become globally competitive, and to become a choice investment destination, the Nigerian capital market must continue on its mission, striving for excellence in every aspect. 3. The effects of the continued global financial crisis Moving to my last point, the effects of the continued global financial crisis, while they have had an effect on the Nigerian financial market and on the economy at large, have forced us to look inward and to put the appropriate measures in place to capitalize on what I consider to be an opportunity for emerging economies. I thought I should share some information obtained from a study conducted by the Economist Intelligence Unit of the Economist Group for PWC. The study is an outward looking survey for the
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year 2025 which revealed some interesting facts that lend support to the journey the Nigerian capital markets have embarked upon. The study revealed that (a) companies from developed countries see an uncertain regulatory environment as the main concern with choosing to list on an emerging market stock exchange; (b) liquidity/turnover velocity as the most important factor when choosing a stock exchange/market for an IPO; and (c) stock exchanges in developed markets that underestimate the competition from emerging market exchanges will lose market share to them. This insight, along with other trends we are seeing in the Nigerian market, leads me to believe that African markets are on their way to experiencing a new kind of growth. So, Id like to seize this moment to remind us that we are all part of this history in the making. As economies around the world struggle to maintain growth, the global recovery continues to suffer new setbacks, and growth has been disappointing. As output is contracting in the euro area, growth has decelerated in many other countries. Developed countries will have to continue to utilize

monetary and fiscal policy to spur growth in their economies, while in Europe, a pullback of crossborder private capital flows has driven up funding costs in the periphery for all borrowers, and the effect on growth is causing pain across the continent. Yet, what has been referred to as the last frontier this continent of ours Africa is experiencing the kind of growth from which the BRICs were borne. For this reason alone, we are presented with an opportunity to strengthen our position in the global financial marketplace, and to do so by exercising good judgment. Conclusion In conclusion, according to the most recent IMF World Economic Outlook Report for October 2012, Nigerias GDP is projected to grow at 7.1% for 2012, with a healthy forecast of 6.7% in 2013. Accordingly, Nigeria is considered one of the top fastest growing economies in the world, of which Africa has ten. With a strong regulatory environment, a high level of liquidity, investment product diversity, and a world-class level of service and excellence, we will be able to compete effectively with larger, developed global markets. This is our time, and the Nigerian capital markets, along with the entire financial market, should embrace it! Thank You.

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