Elements of the Momentum of

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• Elements of the Momentum of
• Nigerias Financial Services Sector
• by
• Dr. Abraham E. Nwankwo
• Director-General, Debt Management Office, Nigeria
• April 2009

DEBT MANAGEMENT OFFICE NIGERIA
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OUTLINE
DEBT MANAGEMENT OFFICE NIGERIA

• A.1. Capital Market Sovereign Bond Market
• A.2. Capital Market Equities
• B. Banking Sector
• C. Conclusion

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A. Capital MarketA.1
SOVEREIGN BOND MARKET (1) NIGERIA
Progression of the Sovereign Bond Market
DEBT MANAGEMENT OFFICE NIGERIA
  TENOR Testing Phase Smoothening Phase Regular Monthly Issuance Phase Regular Monthly Issuance Phase Regular Monthly Issuance Phase Regular Monthly Issuance Phase
  TENOR 2003 2004 2005 2006 2007 2008
2-YEAR   - v      
3-YEAR v - v v v v
5-YEAR v -   v v v
7-YEAR v -   v v  
10-YEAR v -     v v
20-YEAR   -       v
During this year, in addition to smoothening to
eliminate large fluctuations in weekly issuance
of the NTBs, the DMO in conjunction with the CBN
restructured part of the existing stock of 91-day
NTBs to 182-day 364-day NTBs.
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SOVEREIGN BOND MARKET (2)NIGERIA SUMMARY OF FGN
BONDS ISSUED FROM 2005 TO 2008 (N Billion)
DEBT MANAGEMENT OFFICE NIGERIA
  2nd FGN Bonds Issued in 2005 Issue Amount Subscription Allotment Oversubscription Rate Percentage Allotted
  2nd FGN Bonds Issued in 2005 140,000.00 326,361.87 178273.72 133.12 127.34
3rd FGN Bonds Issued in 2006 411,753.16 779,732.13 448,836.00 89.37 109.01
4th FGN Bonds Issued in 2007 603,696.54 1,179,293.88 603,696.54 95.35 100.00
5th FGN Bonds Issued in 2008 515,000.00 845,951.53 491,961.16 64.26 95.53
Total 1,670,449.70 3,131,339.40 1,722,767.42 87.45 103.13
Note
Before the regular monthly offers commenced in July 2005, there was a test offer in 2003 of 3, 5, 7, 10-year Tenors amounting to N150 billion. The subscription amounted to N72.57 as a result of which only N72.57 billion was allotted. Before the regular monthly offers commenced in July 2005, there was a test offer in 2003 of 3, 5, 7, 10-year Tenors amounting to N150 billion. The subscription amounted to N72.57 as a result of which only N72.57 billion was allotted. Before the regular monthly offers commenced in July 2005, there was a test offer in 2003 of 3, 5, 7, 10-year Tenors amounting to N150 billion. The subscription amounted to N72.57 as a result of which only N72.57 billion was allotted. Before the regular monthly offers commenced in July 2005, there was a test offer in 2003 of 3, 5, 7, 10-year Tenors amounting to N150 billion. The subscription amounted to N72.57 as a result of which only N72.57 billion was allotted. Before the regular monthly offers commenced in July 2005, there was a test offer in 2003 of 3, 5, 7, 10-year Tenors amounting to N150 billion. The subscription amounted to N72.57 as a result of which only N72.57 billion was allotted. Before the regular monthly offers commenced in July 2005, there was a test offer in 2003 of 3, 5, 7, 10-year Tenors amounting to N150 billion. The subscription amounted to N72.57 as a result of which only N72.57 billion was allotted.
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SOVEREIGN BOND MARKET (3) SECONDARY MARKET
Performance of the FGN Bonds
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• Primary Dealer-Market Maker System was introduced
  by 2nd half of 2006 20 Primary Dealer Market
  Makers were licensed.
• Currently, there are 21 primary Dealer Market
  Makers -16 deposit money banks and 5 discount
  houses.

YEAR No. OF DEALS VOLUME (Units) FACE VALUE (N) Change
2006 5,482 585,410,867 585,410,867,000 -
2007 30,241 3,947,284,982 3,947,284,982,000 574.28
2008 80,135 10,090,235,806 10,090,235,806,000 155.62
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SOVEREIGN BOND MARKET (4) Nigeria
Transformation of the Domestic Debt Stock by
Instruments - Dec. 31, 2002 Compared to Dec 31,
2008
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2002 2002 2008 2008
Instrument Amount (N billion) Amount (N billion)
NTBs 733.76 62.93 471.93 20.34
FGN Bonds nil nil 1,445.60 62.30
Treasury Bonds 430.61 36.93 402.26 17.34
Development Stocks 1.63 0.14 0.52 0.02
Total 1,166.00 100.00 2,320.31 100.00
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SOVEREIGN BOND MARKET (5) 
DEBT MANAGEMENT OFFICE NIGERIA
Nigeria Transformation of the Domestic Debt
Outstanding By Holder Dec. 31, 2002 compared
to Dec. 31, 2008
2002 2002 2008 2008
Holder Amount Outstanding Amount Outstanding
Central Bank 532.5 45.67 289.4 12.47
Banks Disc. Houses 460.2 39.47 1,482.2 63.88
Non-Bank Public 173.3 14.86 428.0 18.45
Sinking Funds nil nil 120.8 5.20
Total 1,166.0 100.00 2,320.3 100.00
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SOVEREIGN BOND MARKET (6)
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DATA TABLE
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A.2 Capital Market Equities
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• The Nigerian Stock Exchange (established in 1960
  as Lagos Stock Exchange), one of the oldest in
  Africa a private sector company.
• Has 10 trading platforms across the country
• Regulated by the Securities and Exchange
  Commission.
• Has Dual Listing agreements with the Johannesburg
  Stock Exchange, Ghana Stock Exchange and the
  Bourse in Cote DIvoire.
• One of the fastest growing in the world All
  Shares Index grew from 6,992.1 in 1996 to 62,700
  by April 2007.
• Automated trading, seamless, on-line
  technology across all the trading floors.
• Supported by automated Central Securities
  Clearing System (CSCS).
• Beyond the worldwide capital Market Crisis
  strong prospects because of the underlying
  opportunities in the real sector of the countrys
  economy which remain largely un-exploited.

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b. Banking SectorStructure
DEBT MANAGEMENT OFFICE NIGERIA

• Universal Banks (24) with 22 listed on the
  Nigerian Stock Exchange (NSE)
• Discount Houses (5), ownership dominated by
  Universal Banks.
• Primary Mortgage Institutions - Many with 3
  listed on the NSE.
• Micro-finance Banks relatively new.
• Strength of Universal Banks
• Before January 2006, 89 in number minimum
  capital requirement was N2billion but after
  January 2006 when minimum capital requirement
  became N25 billion, 25 resulted from mergers and
  acquisitions (two consolidate banks later merged
  to bring the current number to 24)
• 5 are among the Top 10 in Africa.
• Some are ranked among the Top 1000 in the world.
• Total Capitalization as at March, 2008 (before
  the Global Financial Crisis) N12.640trillion
• International Presence 5 now operate in the UK
  some have subsidiaries in Ghana, Cote DIvoire,
  Sierra Leone, Gambia, Zambia, Uganda and South
  Africa.
• Access to International Capital Market In 2007
  GTB and First Bank sourced USD350 bln and USD175
  bln, respectively, from the ICM
• -Diamond Bank and Access Bank have raised equity
  capital through GDRs.

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C. CONCLUSION
DEBT MANAGEMENT OFFICE NIGERIA

• Nigeria has a strong and rapidly growing
  financial Services Sector.
• Rapid and strong growth of the resuscitated
  Sovereign Bond Market provides an invaluable
  synergy with the already-developed Equities
  Market and the very dynamic Banking Sector
• Combined with a diversity of potentials in the
  real sector agriculture, manufacturing, solid
  minerals, energy, transportation etc, the rapidly
  transforming financial services sector provides a
  good environment for investors.

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