Paper contributing to Central Bank of Nigeria policy formulation of the Mortgage market and the encouragement of affordable home building in Nigeria...

1. NEX RUBICA GROUPNEX RUBICA GROUP Now is the timeNow is the time
1st Annual Conference on
Affordable Homes for All, 1st to
2nd Dec 2008. Abuja, Nigeria
Mortgage Finance and localMortgage Finance and local
currency bond markets incurrency bond markets in
NigeriaNigeria –– a Nex Rubica Viewa Nex Rubica View
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2. Presentation summary
• Summary figures on Nigeria’s mortgage market
• Nigerian banking system and future funding
• Simple SWOT analysis
• Wholesale market strengths
– Risks and returns
• Wholesale market weakness
– International risk and return
• Wholesale market opportunities
– Trends
• Wholesale market threats
– Trends
• Wholesale market threats
– Nigerian Bank Spreads need to fall
• Generic policy conclusions
• Bank specific conclusions
• Appendix
–Wholesale market conditions: Annualised 90 day GBP Libor 2002- 2005
–Wholesale market conditions: Monthly 90 day GBP Libor 2002- 2005
–Wholesale market conditions: Daily 90 day GBP Libor 2002- 2005
–Wholesale market conditions: Annualised 90 day NGN Libor 2002- 2005
–Wholesale market conditions: Monthly 90 day NGN Libor 2002- 2005
–Wholesale market conditions: Daily 90 day NGN Libor 2002- 2005
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3. Nigeria’s Mortgage market
• Nigeria is the most populous country in sub-Saharan Africa - circa 140 million people, growing
at a rate of about 2.83% per annum (financial system strategy draft report 2020).
• It is estimated that about 64% of the population currently resides in the rural areas where
social amenities and infrastructure are inadequate. Exacerbating continued rural urban
migration.
• Nigeria’s growing population coupled with the increasing rural urban drift will further serve to
acerbate the size of the potential housing deficit over the short to medium term and
addressing the housing need of Nigeria will require huge financial resources ranging in the
tens of trillion naira.
• The US – Nigeria Development Institute puts available housing stock in Urban Nigeria at 10.7m
units, out of which it is estimated that less than 5% is in the formal mortgage system.
• Internal research by World bank project teams estimate the annual housing need of the
country at between 500,000 – 1,000,000 units when the existing shortfall is met, at the rate of
urbanization. All these estimates point to a very large housing supply deficit in both the rural
and urban areas that need to be addressed in a structured manner to increase existing
housing stock.
• The development of a viable housing Finance Market is the answer to not only making housing
accessible to a greater percentage of the population, but also the development of the Nigerian
economy. The challenge is how to mobilize/release the critical amount of funds required to
jumpstart start the process.
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4. The Nigerian bank sector has strong
future funding requirements.
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5. A simply S.W.O.T analysis
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6. Wholesale market strengths:
Risks and returns
Yearly average monthly average daily average
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7. Wholesale market weaknesses:
International risks and returns
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Yearly average monthly average daily average

8. Wholesale market opportunities: Trends
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Security Description Mid rate Maturity
3rd FGN BOND 2009 SERIES 11 6.8164% 28-Jul-09
3rd FGN BOND 2009 SERIES 12 7.0606% 25-Aug-09
4TH FGN BOND 2010 SERIES 1 8.0049% 26-Jan-10
4TH FGN BOND2010 SERIES 4 7.9216% 27-Apr-10
4TH FGN BOND2010 SERIES 7 7.9338% 27-Jul-10
4TH FGN BOND2010 SERIES 12 7.2990% 26-Oct-10
3rd FGN BOND 2011 SERIES 13 8.3543% 29-Sep-11
4TH FGN BOND 2012 SERIES 2 9.2437% 23-Feb-12
4TH FGN BOND2012 SERIES 5 9.2971% 25-May-12
4TH FGN BOND2012 SERIES 10 9.1766% 31-Aug-12
4TH FGN BOND2014 SERIES 3 9.4540% 30-Mar-14
4TH FGN BOND2014 SERIES 6 9.5559% 29-Jun-14
4TH FGN BOND2014 SERIES 11 9.4660% 28-Sep-14
4TH FGN BOND2010 SERIES 8 9.6327% 27-Jul-17
4TH FGN BOND2017 SERIES 9 10.3637% 31-Aug-17

9. Wholesale market opportunities: Trends
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Security description Mid rate Maturity
3rd FGN BOND 2009 SERIES 11 7.540% 28-Jul-09
3rd FGN BOND 2009 SERIES 12 7.461% 25-Aug-09
4TH FGN BOND 2010 SERIES 1 8.548% 26-Jan-10
4TH FGN BOND2010 SERIES 4 8.476% 27-Apr-10
4TH FGN BOND2010 SERIES 7 8.907% 27-Jul-10
4TH FGN BOND2010 SERIES 12 8.712% 26-Oct-10
4TH FGN BOND2010 SERIES 13 9.575% 30-Nov-10
4TH FGN BOND2010 SERIES 14 10.298% 14-Dec-10
5TH FGN BOND2018 SERIES 3 10.214% 25-Jul-11
3rd FGN BOND 2011 SERIES 13 8.652% 29-Sep-11
4TH FGN BOND 2012 SERIES 2 10.192% 23-Feb-12
4TH FGN BOND2012 SERIES 5 10.628% 25-May-12
4TH FGN BOND2012 SERIES 10 10.593% 31-Aug-12
5TH FGN BOND2013 SERIES 1 11.206% 25-Jan-13
4TH FGN BOND2014 SERIES 3 9.837% 30-Mar-14
4TH FGN BOND2014 SERIES 6 10.335% 29-Jun-14
4TH FGN BOND2014 SERIES 11 9.552% 28-Sep-14
4TH FGN BOND2010 SERIES 8 10.511% 27-Jul-17
4TH FGN BOND2017 SERIES 9 12.049% 31-Aug-17
5TH FGN BOND2018 SERIES 2 12.017% 30-May-18

10. Wholesale market threats: Trends
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Current Inflation Rate
Year-on-Year
change (%)
12-Month
Average
Change (%)
October-08 14.7 10.1
September-08 13.00 9.20
August-08 12.4 8.50
July-08 14.00 7.80
June-08 12.00 7.00
May-08 9.70 6.50
April-08 8.20 6.10
March-08 7.80 5.80
February-08 8.00 5.50
January-08 8.60 5.50
December-07 6.60 5.40
November-07 5.20 5.50
Treasury Bills Discount
Rate
Latest Stop
Rate
91-day Treasury Bill Rate (%) 8.30
182-day Treasury Bill Rate (%) 9.55
364-day Treasury Bill Rate (%) 9.65
OMO Rate (%) 55-day 6.49
Monetary Policy Rate (%) 9.75
As at 26th November 2008.Source: First Securities Discount House Ltd, Lagos.

11. NEX RUBICA advisory
Nigeria Interbank Offer Rate
(NIBOR Yield Curve) Nov 2008
Source: Nigerian Money Markets Association website
Wholesale market threats: Trends
Nigerian Banks’ wholesale spreads need to fall
Nigeria Interbank T-Bills True Yield Fixing
(NITTY Yield Curve) Nov 2008
Source: Nigerian Money Markets Association website

12. Generic Policy Conclusions – the issues.
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There is an opportunity to learn lessons from the west's experience
and create a world class mortgage finance sector. including starting
a covered bond market, the pre-emptive use of laws similar to the
Glass-Steagall Act and the adoption as standard of international
bank accounting requirements that mark
Derivative positions to market
as stipulated in IAS 39,
Financial Instruments:
Recognition and
Measurement and
IAS 32, Financial
instruments: Disclosure
and Presentation.

13. Bank specific Conclusions –
the size of the opportunity depends on your ambitions
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The key task for banks is to develop individualised
plans that manage risks appropriately and
generate new returns by accessing long dated
finance at a price that can realistically
drive the development
of a strong naira
denominated
mortgage market.
Combinations
of development
of targeted
asset
management
propositions
and effective use
of debt capital
markets and
structured products
can yield strong assess
to competitively priced
long dated funds.

14. Wholesale market conditions:
Annualised 90 day GBP Libor 2002- 2005
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15. Wholesale market conditions:
Monthly 90 day GBP Libor 2002- 2005
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16. Wholesale market challenges:
Daily 90 day GBP Libor 2002- 2005
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17. Wholesale market conditions:
Annual 90 day NGN Nibor 2002- 2005
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18. Wholesale market conditions:
Monthly 90 day NGN Nibor 2002- 2005
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19. Wholesale market challenges:
Daily 90 day NGN Nibor 2002- 2005
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20. Wholesale market challenges:
Daily 90 day NGN Nibor 2002- 2005
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ANY QUESTIONSANY QUESTIONS
If you would like to discuss any of the issues, we invite you to contact us::
Executive Principal Chief Executive
Chidi OTI-OBIHARA Martin ORJI
advisory@nexrubica.com

21. DisclaimerDisclaimer
(B) This material is not intended as an offer or solicitation for the purchase or sale of any
financial instrument. Nex Rubica Advisory or its local affiliate and employees may hold a
position or act as local agent in the Nigerian debt market as discussed herein or act as
advisor to such issuer.
This report has been prepared by an entity which may have its own specific interest in
relation to the issuer, the financial instruments or the transactions which are the subject
matter of the report. We do not make related investment advice as mentioned herein
available to any persons other than professional or institutional investors wishing to
enage in Nigeria.
Copyright 2008 Nex Rubica. All rights reserved
(A) Estimates constitute our judgment and are subject to change without notice. Past
performance is not indicative of future results. The investments and strategies
discussed here may not be suitable for all investors; if you have any doubts you
should consult your investment advisor. The investments discussed may fluctuate
in price or value.
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