THE NIGERIAN CAPITAL MARKET




         Ebenezer Olufowose
  Executive Director, Access Bank Plc
            6th March, 2...
Presentation Outline



   – Market Performance Indices

   – Instruments & Issuers

   – Key Issues




                 ...
Market Performance Indices




                                                           3
                              ...
Market Growth – Market Cap / Index
                                                                                       ...
Market Growth – Securities Turnover


                                    Annual Market Turnover on the NSE

             ...
Market Growth – Trading in Fed Govt Bonds

 •                The introduction of secondary market trading in government se...
Sovereign Yield Curve



                                       NIGERIAN GOVERNMENT RISK FREE YIELD CURVE AS AT DECEMBER 2...
Market Capitalisation as a Percentage of GDP




                               Market Capitalisation as Percentage of GDP...
Key Growth Drivers – Banking Sector Consolidation

•       Banking sector capitalisation as a percentage of total market c...
Key Growth Drivers – Changes in Domestic Debt Profile
   •                      In 2001, Government debt was essentially i...
Key Growth Drivers – High Returns

•       The NSE ASI appreciated by 75% between 2006 and Dec 2007, due to increases in
 ...
Key Growth Drivers – High Returns
            In 2006, equity returns on the NSE ranked 3rd amongst emerging markets, and
...
Instruments & Issuers




                                                      13
                                       ...
Equity Vs Bonds

 •                                Market remains dominated by equities which accounted for 85% of total m...
New Equity Issues By Sectors (2007)


                               NEW EQUITY ISSUES BY SECTORS IN 2007


              ...
Domestic Bonds

•    Outstanding bonds are dominated by FGN issues. This accounted for 95% of total
     outstanding bonds...
Key Issues

•     The bond market is dominated by FGN bonds. The corporate bond

      market which collapsed in the early...
Key Issues

•     The collapse of the corporate bond market has led to over-dependence on bank
      markets with negative...
Thank You




                                          19
                                       Page 19
The Quest for Ex...
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Access Bank Seminar Session 3b - Ebenezer Olufowose

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Access Bank Seminar Session 3b - Ebenezer Olufowose

  1. 1. THE NIGERIAN CAPITAL MARKET Ebenezer Olufowose Executive Director, Access Bank Plc 6th March, 2008 The Quest for Excellence
  2. 2. Presentation Outline – Market Performance Indices – Instruments & Issuers – Key Issues 2 Page 2 The Quest for Excellence
  3. 3. Market Performance Indices 3 Page 3 The Quest for Excellence
  4. 4. Market Growth – Market Cap / Index • Bonds • Equities – Secondary market trading in Govt – market cap was up by more than 15 times Securities started in Feb 2006. in less than 5 years, from below N1 trillion – The Access Bank Govt Bond Index in 2003 to N12.5 trillion by Feb 2008. was introduced in Dec 2006. The – ASI more than tripled from 20,129 points in Index grew from a base of 1000 2003 to 64,351 points by February 2008. points in December 2006 to 1,150 – Steep growth between 2005 amd 2008 points as at February 2008 driven largely by banking sector – Market cap also rose from N90 billion consolidation. in Dec 2006 to N658 billion in Feb 2008. MARKET CAPITALISATION/ ALL-SHARE INDEX (2003 TO FEB. 2008) ACCESS BANK NIGERIAN GOVERNMENT BOND INDEX 14,000.0 70,000 700 1200 12,000.0 60,000 600 M arket Capitalisation (N'Billion) 1150 10,000.0 50,000 Market Cap. (N'Billion) 500 All-Share Index 8,000.0 40,000 400 MARKET Market CAP Index 1100 CAPITALISATION All Share Index INDEX 6,000.0 30,000 300 4,000.0 20,000 200 1050 2,000.0 10,000 100 - - - 1000 2003 2004 2005 2006 2007 2008 Dec-06 Mar-07 Jun-07 Sep-07 Dec-07 Feb-08 4 Page 4 The Quest for Excellence
  5. 5. Market Growth – Securities Turnover Annual Market Turnover on the NSE 2,500.00 2,000.00 (N'Billions) 1,500.00 1,000.00 500.00 - 2003 2004 2005 2006 2007 Source: Nigerian Stock Exchange (NSE) 5 Page 5 The Quest for Excellence
  6. 6. Market Growth – Trading in Fed Govt Bonds • The introduction of secondary market trading in government securities in Feb 2006, has led to the development of a yield curve. SECONDARY MARKET ON FGN BONDS 600,000 5000 4500 500,000 4000 3500 400,000 3000 (N illion) VALUE 300,000 2500 quot;B DEALS 2000 200,000 1500 1000 100,000 500 0 0 Feb-06 Jun-06 Sep-06 Dec-06 Mar-07 Jun-07 Sep-07 Dec-07 Jan-08 6 Page 6 The Quest for Excellence
  7. 7. Sovereign Yield Curve NIGERIAN GOVERNMENT RISK FREE YIELD CURVE AS AT DECEMBER 2007 12.00 11.00 10.00 YIEL D (% ) 9.00 8.00 7.00 6.00 5.00 30 DAYS 60 DAYS 90 DAYS 1 YEAR 3 YEARS 5 YEARS 7 YEARS 10 YEARS TENOR TO MATURITY 7 Page 7 The Quest for Excellence
  8. 8. Market Capitalisation as a Percentage of GDP Market Capitalisation as Percentage of GDP 50.00% 40.00% Percentage of GDP 30.00% 20.00% 10.00% 0.00% 2003 2004 2005 2006 2007 Years 8 Page 8 The Quest for Excellence
  9. 9. Key Growth Drivers – Banking Sector Consolidation • Banking sector capitalisation as a percentage of total market capitalisation increased from 36% in 2002 to 60% in 2006 a direct consequence of the consolidation in the sector. MARKET CAPITALISATION PER SECTOR (2006) MARKET CAPITALISATION PER SECTOR (2002) Other Sectors 20% Other Sectors Banking 26% 36% Petroleum Mkting 3% Petroleum Mkting Banking Food 7% 60% 10% Breweries Food Breweries 7% 9% 22% 9 Page 9 The Quest for Excellence
  10. 10. Key Growth Drivers – Changes in Domestic Debt Profile • In 2001, Government debt was essentially in the form of treasury bills and treasury bonds. • From 2003, the Government entered the bond market by issuing bonds of 3,5,7 and 10- year tenors, as part of a planned bond issuance programme. • By 2007, FGN bonds accounted for 49.41% of total Government domestic debt. DOMESTIC DEBT BY TYPE (2001-2007) 2,500 2,000 V L E (N illio ) n 1,500 Development Stocks 'B Treasury Bonds FGN Bonds AU Treasury Bills 1,000 500 0 2001 2002 2003 2004 2005 2006 2007 10 Page 10 The Quest for Excellence
  11. 11. Key Growth Drivers – High Returns • The NSE ASI appreciated by 75% between 2006 and Dec 2007, due to increases in new issues as well as a generally bullish market fueled by substantial new injection of local and offshore liquidity. • The returns were enhanced by the appreciation of the Naira – over 8% in 2007. EXCHANGE RATE/ALL-SHARE INDEX 70000 140 60000 135 50000 130 N/US$ RATE 40000 125 INDEX All-Share Index N/US$ RATE 30000 120 20000 115 10000 110 0 105 Jun-03 Dec-03 Jun-04 Dec-04 Jun-05 Dec-05 Jun-06 Dec-06 Jun-07 Dec-07 11 Page 11 The Quest for Excellence
  12. 12. Key Growth Drivers – High Returns In 2006, equity returns on the NSE ranked 3rd amongst emerging markets, and • second amongst African markets. • This was driven by strong demand from retail and institutional investors as well as foreign portfolio investors. Select African Markets (2006) 100 90 80 70 Market Retur, in % 60 50 40 30 20 10 0 Egypt Morocco South Africa Zimbabwe Nigeria 12 Page 12 The Quest for Excellence
  13. 13. Instruments & Issuers 13 Page 13 The Quest for Excellence
  14. 14. Equity Vs Bonds • Market remains dominated by equities which accounted for 85% of total market capitalisation in 2005 and 77% in 2007. Market Capitalisation (Equities vs. Bonds) 14000 12000 Capitalisation (N'Billion) 10000 8000 Bonds Equities 6000 4000 2000 0 2003 2004 2005 2006 2007 14 Page 14 The Quest for Excellence
  15. 15. New Equity Issues By Sectors (2007) NEW EQUITY ISSUES BY SECTORS IN 2007 Food 1% Others 2% Insurance/Financi al Services 1% Banks 96% Source: Securities and Exchange Commission 15 Page 15 The Quest for Excellence
  16. 16. Domestic Bonds • Outstanding bonds are dominated by FGN issues. This accounted for 95% of total outstanding bonds in 2007. • Corporate bonds are largely non-existent. OUTSTANDING BONDS AS AT DECEMBER 2007 CORPORATE BONDS 3% STATE BONDS 1% .FEDERAL GOVT BONDS 96% 16 Page 16 The Quest for Excellence
  17. 17. Key Issues • The bond market is dominated by FGN bonds. The corporate bond market which collapsed in the early 1990s is yet to revive. • Equities remain the dominant instrument for raising long term capital with banks accounting for 60% of market capitalisation. • Corporations have continued to rely on the bank market to meet their short and medium term needs. • Market is ready for introduction of innovative structured investment products eg Asset-backed securities, Mortgage-backed securities, Exchange Traded Funds, etc 17 Page 17 The Quest for Excellence
  18. 18. Key Issues • The collapse of the corporate bond market has led to over-dependence on bank markets with negative consequences: – Inability to raise financings for a wide range of infrastructure projects that directly contribute to economic development. – Exposure of borrowers to short term market volatilities. – Funding mismatch arising from the funding of long term capital projects with short-term borrowings. – Potential for over-valued equity markets as there are limited alternatives • Key to further development of the market is the diversifying of the issuer base to cover new instruments and credit risk of different economic sectors. 18 Page 18 The Quest for Excellence
  19. 19. Thank You 19 Page 19 The Quest for Excellence
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