Nigeria, still betting on oil

St ra p la n

Nigerian Economics
Nigeria, Still
Betting on Oil

Nigeria, Still Betting on Oil A complimentary publication of Straplan Advisory January 2013

St ra p la n

It is a capital mistake to theorize before one has data. Insensibly one
begins to twist facts to suit theories, instead of theories to fit facts.
- Arthur Conan Doyle (Sherlock Holmes)

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Summary St ra p la n

A country without focus on research and development would keep searching for
development …

2012 was a difficult year for the global economy but the outlook appears brighter for 2013.
Perhaps new domestic US crude oil production will not affect OPEC prices, however, we
expect that terms of trade between the US and its trade partners will be affected. We have
observed a gradual decline in America’s crude oil imports from Nigeria with a corresponding
steady increase in imports from Saudi Arabia, since 2011.

The state of the euro area is expected to weaken growth in other economies, as was the
case in 2012, thereby dampening the steady rise in global oil consumption.

Recent rally in oil prices on announcement of a pick-up in China’s oil imports supports the
fact that demand from China and other emerging economies can buoy the price of oil and
counterbalance the dampening effect of weak OECD demand.

The debate over Nigeria’s deficits, debt, savings, income and expenditure were outside the
context of their implications on specific economic enablers such as power, infrastructure
and research and development.

We are concerned about Nigeria’s ability to manage and effectively harness its oil receipts
during this period of high oil prices, without a working blueprint that articulates a clear
process of socio-economic transformation.


Nigeria: Still Betting on Oil… St ra p la n
Benchmark Oil Price

L $40 $100 H
2012 was a difficult year for the global economy but the outlook for 2013 Bonny Light ($/bbl) 1999 – 2005
appears brighter. 7-yr Simple Ave. = 28.95
65.0 7-yr Median Ave. = 26.95
It is a good time for factor driven economies, especially countries like 55.0
Nigeria whose main export, crude oil, is currently enjoying a higher market
45.0
value, due to strong demand and threats to supply from geopolitical
tensions. The outlook on Nigeria’s economic growth remains positive in 35.0
2013, and its potential as a frontier investment destination is indisputable. 25.0
The issue is ‘how much longer would oil prices remain high,’ that
15.0
economies like Nigeria would continue to benchmark their consumption
patterns on a single commodity? 5.0

Jan-99

Aug-99
Nov-99
Mar-00

Jan-02

Aug-02
Dec-02
Mar-03

Jan-05

Aug-05
Dec-05
Apr-99

Jul-00
Oct-00
Feb-01
May-01
Sep-01

Apr-02

Jul-03
Oct-03
Feb-04
Jun-04
Sep-04

Apr-05
Agreeably, oil prices are expected to remain above a $100 in 2013, even

16-Mar

21-Mar
01-Jan

05-Jan

09-Jan
09-Aug

13-Aug

17-Aug
21-Apr

22-Oct

25-Apr

27-Oct

29-Apr
27-Nov

04-Jul

30-May

01-Dec

09-Jul

05-Dec
09-Feb

17-Sep

14-Feb
03-Jun
21-Sep
though economic slowdown in the OECD, especially in the euro area is
expected to dampen the rise in global oil consumption. Recent rally in oil Bonny Light ($/bbl) 2006 - 2012
prices on announcement of a pick-up in China’s oil imports, supports the 150.0
fact that demand from China and other emerging economies can buoy the 135.0
7-yr Simple Ave. = 87
7-yr Median Ave. = 80
price of oil and counterbalance the dampening effect of weak OECD
120.0
demand.
105.0
We are concerned about Nigeria’s ability to manage and effectively harness 90.0
its oil receipts during this period of high oil prices. Our outlook on Nigeria’s 75.0
economic growth in 2013 remains positively strong, anchored on the 60.0
nation’s seeming commitment to macroeconomic stability and proceeds of 45.0
high oil prices. Nigeria will still record a relatively strong growth (7%) that is 30.0

07-Aug-06

11-Aug-09

15-Aug-12
30-Dec-05
19-Apr-06

25-Nov-06
15-Mar-07

21-Oct-07
08-Feb-08
28-May-08
15-Sep-08
03-Jan-09
23-Apr-09

29-Nov-09
19-Mar-10

25-Oct-10
12-Feb-11

20-Sep-11
08-Jan-12
27-Apr-12

03-Dec-12
03-Jul-07

07-Jul-10

02-Jun-11
quite far behind its potential. We do not expect growth and development to
be revolutionary on a national level, though we are confident about the
positive performance of certain states of the federation.


Global Issues - United States to restructure its oil consumption St ra p la n
America: delaying spending cuts
The temporary "fiscal deal"—may lead to some US$600bn in tax increases and spending cuts that will continue over the next 10 years, starting
from 2013. Taxes were firmed on the wealthy in form of hike in capital gains, dividend rates and such. There are more hurdles to jump as policy
makers deliberate on the debt ceiling in February.
The moral of the story … ‘America has got to start paying its debt’..
The fiscal logjam threatening the world’s largest economy cannot be loosened by a mere ‘fiscal cliff deal.’ America’s fiscal logjam necessitates a
cut in spending while ‘risking an economic slowdown’ now or facing worse consequences later. The logjam was caused by inordinate
consumption, aided by debt and the only way out is to restructure the flow and/or cut back on spending to pay the bills.

We are rather positive about the performance of the US economy into the first quarter of the year 2013, in that the rising optimism due to its
positive performance recently, though marginal, would help stabilize its course in 2013. We also anticipate a clear restructuring in US spending
over the next five years as the nation intensifies its course towards self reliance in certain industries. On the other hand, we expect the US to seek
better terms of trade and credit among its trade and finance partners.

Perhaps new domestic US crude oil production will not affect OPEC prices, however, we expect that it will affect terms of trade between the US
and its trade partners. We have observed a gradual decline in America’s crude oil imports from Nigeria with a corresponding steady increase in
imports from Saudi Arabia, since 2011.
‘000 bpd Declining (Crude-oil) imports from Nigeria Top Sources of US Oil Imports in 2011
1700
1500 Mexico, 8%
1300 Nigeria, 10% Canada, 29%
1100
900
700
Venezuela, 11%
500
300
100
Jan-10

Mar-10

May-10

Sep-10

Nov-10

Jan-11

Mar-11

May-11

Sep-11

Nov-11

Jan-12

Mar-12

May-12

Sep-12
Jul-10

Jul-11

Jul-12

Saudi Arabia,
14%
Saudi Arabia Nigeria Angola (OPEC Series)
Source: EIA


Global Issues- Euro Area to dampen global oil consumption St ra p la n
The Euro problems are far from over …
Our outlook on the euro area and the entire OECD region remains the same as encapsulated Ranking % of (EU) Total Trade
in our October 2012 global strategy report, ‘A new world order?’ We expect the region to
United States 13.8%

1
continue in recession well into 2013, with a weak growth in 2014.
The problems facing the EU, especially the euro area, are far from over as the euro economy China 13.3%

2
continues to drag and consumption levels drop. Reports from Germany showed that its GDP Russia 9.5%

3
shrank by 0.5% in Q4 on slow exports and investments. We however observed a sense of ease
Switzerland 6.6%

4
in the financial markets since the ECB’s announcement of a commitment in principle to
unlimited sovereign debt purchases. Norway 4.4%

5
Turkey 3.7%

6
Austerity measures …
There will clearly be stricter fiscal measures across the European Union in 2013, which would Japan 3.6%

7
lead to the discovery or unfolding of other fiscal problems attendant to the debt crisis. There India 2.5%

8
are concerns over the depth of France’s fiscal challenges, political activities in Italy and
Brazil 2.3%

9
turmoil in Greece.

21 10
South Korea 2.1%
Weak consumption will dampen global oil consumption …
The state of the euro area is expected to weaken growth in other economies, as was the case Nigeria 1.1%
in 2012, perhaps slightly better, thereby dampening the steady rise in global oil consumption.

GDP trends in the EU Unemployment
6
Spain 26.2%
25.9%
4 26.0%
Greece
26.0%
2 Ireland 14.6%
14.8%
0 16.3%
Portugal 16.2%
11.1%
-2 Italy 10.8%
10.5%
-4 France 10.4%
Germany 5.4%
-6 5.4%
11.8%
Euro… 11.4%
-8
2008 2009 2010 2011 2012f 2013f 2014f United… 7.8%
7.9%
EU-27 Euro area-17 Germany Ireland EU (27) 10.7%
Greece(p) Spain France Italy 10.6%
Portugal UK Source: EuroStat November September


China to buoy global oil consumption St ra p la n
China preparing to regain momentum China's GDP Growth %
In 2012, growth in China’s economy was particularly weak due to strong decline in European Union 12
imports and general consumption. Nevertheless, we project that China’s economy will rebound to an
9.7 9.6
average 8.1%, as from Q4, 2012 into the year, by way of higher investments and personal spending. 10 9.4 9.2
supported by recent stimulus. China’s exports improved strongly in December, with a positive trade 8.1
balance of $31.6bn. 8 7.6 7.4

To buoy global oil consumption … 6
China’s oil imports increased by 6.8% in 2012 (8% in December), up from 6.1% in 2011 but well below
10% in 2010. Oil prices rallied on the announcement of china’s increased oil imports, signaling potential 4
rise in global oil consumption. China’s crude oil imports, sourced majorly from middle east countries,
have grown substantially over the last decade. 2

China is the world's second-largest consumer of oil behind the United States, with net oil imports at 0
about 5.5mbpd, and the second-largest net importer of oil as of 2009. At 4.5bpd China is the fifth largest Q1'11 Q2'11 Q3'11 Q4'11 Q1'12 Q2'12 Q3'12
producer of oil. The EIA in 2011 projected that China would be world’s largest importer of oil by 2020.
Top 10 Net Oil Importers Top 10 Sources of China's Crude Oil Imports India’s GDP Growth %
US 8.7 Saudi… 20% 11
China 5.5 Angola 10 10.1
12%
10
Japan 4.3 Iran 11%
9
India 2.3 Russia 8%

Germany 2.3 Oman 7% 8

S. Korea 2.2 Iraq 5% 6.8
7 6.6
6.2
France 1.7 Sudan 5% 6
6
Spain 1.3 Venez… 5%
4.9
Kazak… 5
Italy 1.3 4%

Taiwan 1 Kuwait 4% 4
2007 2008 2009 2010 2011 2012f 2013f
Source: eiu.com
Source:EIA Source: China Customs


Nigeria: Fiscal Policy of debt, savings, income and expenditure based on oil price St ra p la n
A large deficit may stimulate the economy, whereas a large surplus may dampen the economy , it is all about Year in year out… a revolutionary structural
the objective of the society and how efficiently it uses its resources. . . transformation is imperative…
The debate over Nigeria’s deficits, debt, savings, income and expenditure were outside the context of their In 2009, following a sharp decline in crude oil
implications on specific economic enablers such as power, infrastructure and research and development. We think prices, Nigeria’s budget projected a revenue
countries can borrow to strengthen the layers of industrialization and improve its competitiveness, there are no anchored on oil at an average international
sentiments in the business principle of ‘leverage.’ Conversely, a country can invest in its goals with its savings. The price of $45/barrel, living on its savings; and
important thing is focus and commitment towards specific goals with the highest multiplier factor. A country in 2010, when oil prices improved, the
would have to determine its expenditure and debt ceiling vis-a-vis its goals, income, savings and resources. budget benchmark price rose to $60, still
N bn Total Debt paying salaries on windfall. The parliament
Classification 2012 Total 2013 Budget
7,000 has now voted for a benchmark oil price of
Budget N’ Bn Prop. N’ Bn $78/barrel in the 2013 Appropriation Bill, as
6,000
against the executives’ proposal of
Recurrent Exp. 2,425.05 2,412.05 5,000 $75/barrel.
Capital Exp. 4,000 Both sides made a show over two
1,519.99 1,540.77 Domestic
3,000 Debt, supposedly different ideologies, that of debt
Statutory Transfers 372.59 380.02 6,346.04 External reduction by the parliament and savings for
2,000 Debt, the latter. To our dismay, while the
Debt Service 559.58 591.76 1,007.39
1,000 authorities beamed the spotlight on the
Total Exp. benchmark price, little was said about the
4,877.21 4,924.60 0
Domestic Debt External Debt
effectiveness or implication of the increase
or decrease on the ease of doing business,
N'bn Budget Priority Areas Debt Composition diversification of exports base,
120%
International industrialization and or competitiveness of
450 Treasury Capital the economy in quantitative terms.
100% Bonds, 5%
400 Market, 8%
350 Non-Paris,
Nigerian
11%
We are concerned about Nigeria’s ability to
300 80% Treasury manage and effectively harness its oil
250
200 Bills, 34%
receipts during this period of high oil prices,
150 60%
100 without a working socio-economic blueprint
50
40%
Multilateral, that articulates a clear process of
0 FGN Bonds, 81% transformation. An outstanding example is
(2012…
SURE-P
Education

Agriculture

61% the Lagos Mega City Plan, a working socio-
20%
Defence

Works

economic blueprint of a vision, cascaded into
Police

Health

Power

0% actionable plans and steps to guide future
Source: Media reports, DMO Domestic Debt External Debt generations with a working slogan to
promote an ideology of collective
commitment … ‘eko oni baje o.’

Nigeria: Fiscal Policy St ra p la n
A country without a focus on research and development would keep searching for development ….
No sustainable transformation is expected in the agriculture sector without the foundations of research and The vicious cycle continues …
development in technology and inputs (seedlings, fertilizers etc.), assuming an effective infrastructure exists… more Nigeria’s drive towards industrialization
so, the development in technology should be able to translate in creative and innovative manufacturing and remains slow as the contribution of the
marketing techniques, instep with the nation’s diverse environmental and economic challenges. The agricultural manufacturing sector to GDP remains
sector development requires a mid to long term approach and policies must be drawn accordingly. marginal. It is instructive that food items
Hotel and Real Business and Share of GDP constitute 21% of foreign exchange
Nigeria’s Imports Restaurants, Estate, Other utilization as at h1 2012. The country’s
80% 0.52 1.78 Services, Others, 6.67 industrial capacity continues to be
0.92
70%
Building and
outsourced to other countries as
60% Construction indicated by the fact that food,
, 2.08 manufactured and industrial items
50% Agriculture,
Wholesale accounted for 61% of forex utilization.
37.2% 37.5% 40.21
40% 31.9% 31.8% and Retail The above scenario underscores the
27.1% Trade, 19.36
30% nation’s inability to diversify its export
20% Finance & base from 90% crude oil. On the other
Crude
10%
Insurance,
Petroleum & hand, Nigeria’s non-oil exports are mainly
3.45
Natural Gas, unrefined, raw agricultural products
0% 14.78
Telecommun Solid which are characteristically not
Q2'2011 Q3'2011 Q4'2011 Q1'2012 Q2'2012
Oil & Gas Non-Oil ication & Manufacturi Mineral, 0.36 competitive in international markets,
Post, 5.71 ng, 4.16 being the bulk of most of sub-Saharan
Africa’s total non-oil exports. Thus, basis
Nigeria's Exports Foreign Exchange Utilization (Visibles)
for deepening African regional trade
120.0% Transport
Sector, 6%
becomes blurred.
96.9% 97.1% 96.5% 97.0% 96.5%
100.0% Oil Sector, Local food production is not mechanized,
Minerals, 2% 30%
80.0%
poor infrastructure further weakens the
Agricultural
coordination of the value chain..
60.0% Sector, 1% Manufacture While agriculture accounts for over 40%
d Products,
40.0% 15%
of the country’s GDP, it is highly
fragmented and at a mere subsistence
20.0% Industrial
3.1% 3.5% 3.0% 3.5% Sector, 25% Food level. The muted effect of the recent
2.9%
Products, flood disaster on food availability is an
0.0% 21%
Q2'2011 Q3'2011 Q4'2011 Q1'2012 Q2'2012 indication of Nigeria’s fragmented and
Crude-Oil Non-Oil non-mechanized agricultural sector.
Sources:CBN, NBS Most Nigerians will import food instead of
agricultural instruments and equipment.


Fiscal policy: Of ease of doing business and competitiveness St ra p la n
Of limited resources and unlimited wants and needs... Nigeria must be creative and promote innovation
Nigerian leaders must think in terms of creating 1-10 million jobs (not 50, 000) just by focusing on the enablers. The fundamental economic questions of
We have observed that fundamentally, there is usually a mismatch between policy objectives and key challenges the society :
of supposed beneficiaries. Over 41 million Nigerians (unemployed + economically active but not in the labour • What to produce
force) out of the 92million economically active in 2011 have added no contribution to the economy. Current • How to produce it
policies should be reviewed in line with the outlook of about 70% of the country’s population who are either 30 • For whom to produce
years or below. Technology development has become more important as a focus for leaders more than ever. • In what quantity and how efficiently are
Millions Unemployment the goods produced?
180 46% Population (Age-Group)
45%
The Nigerian Bureau of Statistics
160 44% observed an increasing disinterest by the
140 43%
42%
42% emerging younger generation in highly
120 labour intensive activities. Hence, many
40%
100 of them would rather remain jobless as
38% 38% 30 years Above 30
80
36% and below, years, 30% the country’s infrastructure still relies on
36% 36%
60 70% manual equipment instead of automated
40 34% machines. Since many policy makers are
20 32% not exactly technology oriented, they fail
0 30% to factor in its development and
2006 2007 2008 2009 2010 2011 emergence as an enabler of efficiency,
Population Economically Active 30 years and below Above 30 years accountability and transparency during
Labour Force Unemployed/economically active policy formulation.
Direction of household expenditure
% of Total Household Expenditure 2009/10
Unemployment Rate % (Age –Group) Clothing and indicates the need for stakeholders
Foot wear (private and public) to strongly focus on
4.8% Fuel/Light
15-24 41.6 4.4% Household housing and food development. It can be
Rent Goods seen that an improvement in housing,
12.1% 4.3% power and food would free up funds to
25-44 17 Health increase household spending on health
0.7%
Transport
and education. It is also instructive to
3.4% note that tubers and plantains represent
45-59 11.5 Education 14.62% of total household expenditure.
0.6%
Food Entertainmen
This food segment accounted for 22.6% of
64.7% Other t total expenditure on food, compared to
60-64 16.7 Services 0.3%
Water
rice, other cereals and vegetables at 5.8%,
4.5%
Source: NBS 0.1% 6.8% and 9.9%, respectively.


SSA Countries Laggards of the table … Doing Business Rankings St ra p la n
Nigeria would benefit more from a deeper integration with other African economies if it industrialize itself…
Doing business in Nigeria is better than in most African countries, hence deepening regional integration is imperative as part of
Electricity is chief among
Nigeria’s foreign policy and comparative advantage strategy. A revolutionary improvement in power, technology development
and consequent industrialization would enable Nigeria to effectively diversify its product base and access other homogenous the constraints to doing
African exports at a comparative advantage. On one hand, the exports basket would be larger and serving more markets. On business in most middle
the other hand, deeper African integration would enable easy access to cheaper raw materials and goods imports. Nigeria’s to lower-income
huge market makes it a potential interest of savvy African investors and more affordable, African oriented products . countries.

Countries Ranking Countries Ranking Countries Ranking Even as it was observed
Mauritius 19 Uganda 120 Sao Tome and Principe 160 that sub-Saharan
countries made the most
South Africa 39 Kenya 121 Cameroon 161
changes towards
Rwanda 52 Cape Verde 122 Equatorial Guinea 162
reformation of their
Botswana 59 Swaziland 123 Senegal 166 electricity sector in
Ghana 64 Ethiopia 127 Mauritania 167 2011/2012, they still
Namibia 87 Nigeria 131 Gabon 170 remain one of the most
Zambia 94 Tanzania 134 Djibouti 171 difficult places to get
Considerations Lesotho 136 Angola 172 electricity.
Sierra Leone 140 Zimbabwe 173
1 Starting a business
Madagascar 142 Benin 175 Nigeria, which introduced
2 Dealing with construction Sudan 143 Niger 176 the most reforms to ease
permits
Mozambique 146 Cote d'Ivoire 177 getting electricity, along
3 Getting Electricity with Malawi, Senegal,
The Gambia 147 Guinea 178 Guinea Bissau, and
4 Registering Property
Liberia 149 Guinea-Bissau 179 Madagascar ranked
5 Getting Credit Mali 151 Democratic Republic of the Congo 181 lowest among SSA
Burkina Faso 153 Eritrea 182 countries at 178, 179,
6 Protecting Investors
Togo 156 Republic of the Congo 183 180, 182 and 183
7 Paying Taxes respectively on the table,
Malawi 157 Chad 184 respectively.
8 Trading Across Borders Comoros 158 Central African Republic 185
9 Enforcing Contracts Burundi 159
10 Resolving Insolvency
Source: Doing Business Rankings , world Bank + IFC Publication.


Monetary policy and Financial Markets- Investment Inflows St ra p la n
Nigeria’s Monetary Policy Committee successfully met its objectives in 2012, in the light of the global and domestic Monetary Policy Committee Decisions in
developments and trends within that period. 2012
The MPC reined-in the rate of inflation, stabilized the Naira, maintained a positive real return and attracted a strong The MPR was unchanged in 2012 to rein in
inflow of foreign funds. Enabled by high oil prices, these actions supported the accretion of Nigeria’s external reserves potential rise in prices, as the CBN used
up to $44billion by December 28, 2012. We expect the MPC’s approach to the MPR to be accommodative in 2013 as other monetary instruments such as the CRR
the rate of inflation moderates and positive real return is still achieved on moderating yields. We expect the MPC to (cash reserve ratio) LRR (liquidity reserve
continue to effectively regulate speculative activities that may put pressure on the Naira. Consequently, our optimism ratio) and DMBs foreign exchange Net
supports a continued trend in foreign inflows as the financial markets add more depth. Open Position to dispel threats to price and
N/$ Naira/Dollar, Inflation and MPR Trends % $Billion Reserves and Exchange Rate movement N/$ exchange rates stability.
165.00 14 50 164.0 Monetary policy opened in 2012 with the
164.00 policy rate at 12% after raising the MPR six
13 45 162.0
163.00 times in 2011 from 6.25% to 12%. The CRR
162.00 13 40
160.0 was increased three times from 1% to 8%
161.00 35 and LR once from 25% to 30% in 2011. The
12 158.0
160.00 30 Naira was also devalued to N155.
159.00 12 156.0 30th - 31st January, 2012
25
158.00 154.0 Retain MPR (12%), CRR(8%) and LRR
11 20
157.00 maintained. The impact of upward
156.00 11 15 152.0
adjustment in fuel price was fresh.

12-Feb-12

12-Apr-12
02-May-12
22-May-12
11-Jun-12

10-Aug-12
30-Aug-12
19-Sep-12
03-Jan-12
23-Jan-12

03-Mar-12
23-Mar-12

01-Jul-12
21-Jul-12

09-Oct-12
29-Oct-12
18-Nov-12
08-Dec-12
28-Dec-12
Oct-12
Jan-12

Feb-12

Mar-12

Apr-12

May-12

Jun-12

Aug-12

Sep-12

Nov-12
Jul-12

19th - 20th March, 2012
MPR (12%), CRR (8%) and LR (30%) in view
Exchange Rate (N/$) Inflation (%) MPR of persistent underlying inflationary
Reserves FX (Interbank)
pressures, need to attract foreign
Investment Inflows Yield (%) The Yield Curve investment and build up reserves .
$million
6,000
21st - 22nd May, 2012
18.0% MPR, CRR, LRR unchanged from previous
5,000 levels
4,000 16.0% 23rd – 24th July, 2012
•Retain MPR at 12%, increased CRR to 12%
3,000 from 8% and reduced NOP to 1% from 3%
14.0%
2,000 to reduce currency speculation
12.0% 17th – 18th September, 2012
1,000
•Maintain MPR, CRR & NOP at previous
Tenor (Months)
0 10.0% levels.
Q2'2011 Q3'2011 Q4'2011 Q1'2012 Q2'2012 Q3'2012e 0 12 24 36 48 60 72 84 96108120132144156168180192204216228240 19th – 20th November, 2012
Direct Investment Inflows Portfolio Investment Inflows •maintain MPR, LRR & CRR at previous
17-Jan-12 21-Dec-12
Source: FDHL Analytics levels.


Financial Markets- The Nigerian Stock Exchange is moving forward St ra p la n
The management of the Nigerian Stock Exchange envisions a market capitalized to $1 trillion by 2017… We expect the posture of stability
This vision considers Nigeria’s revolutionary growth and the listing of large firms across all borders on the Nigerian bourse. and higher returns to bolster the
The vision is being anchored on the introduction of more products and services, on an efficient platform, to attract a Nigerian equities market in 2013.
variety of investors and ensure market robustness and stability. The introduction of an active derivatives market would play Locally, yields on money market
a critical role in deepening the African intra-regional commodities market. We remain optimistic about continued growth securities are expected to moderate
in the NSE in 2013, even as local confidence in the market improves and more initiatives are introduced by the authorities. lower than they averaged in 2012,
Annual Returns % hence, more investors would seek
40 35.45 higher returns in the stock market.
30 International investors on the other
$1 Trillion 18.93 hand will find the Nigerian bourse
20
attractive as uncertainty and lower
Size

10 trade and investments growth
The NSE 0 further encourages diversification
-10 of portfolios to include African
$60 billion securities.
-20
Efficiency -16.31
Growth Path -30 In 2012, the capital market
-40 -33.78 authorities introduced enabling
-50
initiatives to enhance the level of
-45.77
2008 2009 2010 2011 2012 investment activities in the market.
Efficiency
We expect this trend to continue in
%
Foreign Portfolio Investments Vs Domestic NSE vs Other Markets 2013 and look forward to issuing
Investments 40%
35% reports on such themes as they
100
83.5 30% unfold. They include:
80
25% •Increased activities for investment
69 66.8 20%
63.9
59.9
banking
15% •More Private equity interests
60
10%
40.1 •Alternative investments and
36.1 33.2 5%
40 31
0% trading platforms
16.5 -5% • Increased retail Bond sales
20
-10% •Encouraging listing of Energy firms
12-Feb-12

12-Apr-12
2-May-12
22-May-12
11-Jun-12
1-Jul-12
21-Jul-12
10-Aug-12
30-Aug-12
19-Sep-12
3-Jan-12
23-Jan-12

3-Mar-12
23-Mar-12

9-Oct-12
29-Oct-12
18-Nov-12
8-Dec-12
28-Dec-12
0
•Cross-listing of securities and
2008 2009 2010 2011 2012 companies
•Closer integration of Africa’s
FPI Domestic Hang Seng Nasdaq FTSE GDAXI NSE financial markets
Source: NSE, Straplan Research


Disclaimer St ra p la n

Disclaimer

Whilst reasonable care has been taken in preparing this document to ensure the accuracy of facts stated herein and that the information, estimates
and opinions also contained herein are objective, reasonable and fair, no responsibility or liability is accepted either by Straplan or any of its
employees for any error of fact or opinion expressed herein. No reliance should be placed on the accuracy, fairness or completeness of the
information contained in this report as it is based on secondary information. All information and opinions set forth in this document constitute the
analyst(s) position as at the date of the report and may not necessarily be so after the report date as they are subject to change without notice.

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