Nigerian Exchange Group Plc · NSENG:NGXGROUP
Nigerian Exchange — Conference Presentation (February 2022)
46 slides from Nigerian Exchange's conference presentation, Feb 3, 2022
Slide 1: NGX Feb 2022
NGX FEB 2022 Feb 2022 CONTACTS: CHARLIE ROBERTSON Global chief economist @RenCapMan www.fastestbillion.com The frontier and emerging markets investment firm
Slide 2: Africa Outperforms in a Global Recession
AFRICA OUTPERFORMS IN A GLOBAL RECESSION IMF - Jan 2022 WEO update 12.0 Smaller financial 9.6 sector in SSA than 10.0 in US in 2009 8.0 7.6 7.4 7.3 7.2 6.9 6.8 6.1 6.5 5.9 Less dependence 5.7 5.7 6.0 4.9 5.0 4.8 on formal retail, 4.4 4.24.0 4.3 4.0 4.0 3.7 3.9 3.7 more dependence 2.8 3.2 2.4 on agri
Slide 3: COVID - Africa / India / UK
COVID - AFRICA / INDIA / UK There appears to be a COVID reported deaths are an correlation between wealth and insignificant share of normal deaths reported cases of COVID – in most young SSA countries which could reflect age & lack of Tunisia is an older country, but had symptoms or health-care by t
Slide 4: Age Matters
AGE MATTERS Youth was an advantage in 2020/21. Average age of COVID death in UK in 2020 was around 80 years old In Nigeria, 0% of people are 80 and above (there are decimal places of course!) The emerging markets investment firm 3
Slide 5: Sparkling Markets
SPARKLING MARKETS S&P500 is still high despite Global inflation and China recession risks US CPI +6 ppt after GFC and +7 ppt post- COVID The emerging markets investment firm 4
Slide 6: If China Property Goes, It's Game Over for Commodities
IF CHINA PROPERTY GOES .. IT’S GAME OVER FOR COMMODITIES China’s Evergrande – 2025 bond Is Evergrande the New Century collapse of April 2007? Despite US property problems, mkts in mid-2008 were asking when Fed would raise rates. Financial collapse not the key risk. It is commodity demand. The emergi
Slide 7: Are Germany and the US Going to Emulate Japan?
ARE GERMANY (YES) AND THE US GOING TO EMULATE JAPAN? The 1990 crash in Japan saw bond yields plunge over the following decades The 2008 GFC has led to negative Eurozone yields, which anchors low UST yields, which results in a hunt for yield in EM, FM and HY #Chartcrime warning below (different scale
Slide 8: Frontier $ Debt Prices Have Fallen
FRONTIER $ DEBT PRICES HAVE FALLEN With rising US treasury yields, we have seen pressure on African credits from Egypt’s 2050 to Ghana’s 2051 Eurobond and Nigeria’s 2049 Not just Africa, Pakistan and Sri Lanka too The emerging markets investment firm 7
Slide 9: Oil Prices Since 1970
OIL PRICES SINCE 1970 The global oil bill (production x oil price, divided by global GDP) fell from 3-4% of GDP in the 1970s and 4-5% over 1983-85 to 2% of GDP from 1986-2004. It has averaged 3.2% of GDP over 1974-2021. 1.1% of GDP was the 50-year low in 1998 (oil was $20 in 2020 prices). In current
Slide 10: Commodity Price Lift
COMMODITY PRICE LIFT Commodity prices help provide the funds for development But even a doubling of oil, gas or copper prices won’t make most as rich as Botswana An oil price of $400 per barrel is required to give Nigeria revenues similar to Botswana in 2018 The emerging markets investment firm 9
Slide 11: Oil Isn't Enough to Make Nigeria Gulf-Rich
OIL ISN’T ENOUGH TO MAKE NIGERIA GULF-RICH The emerging markets investment firm 10
Slide 12: Old Nigeria Indicators
OLD NIGERIA INDICATORS 2019 2020E 2021E 2022E GDP % ch 2.2 -1.8 2.5 2.8 Oil production 2.0 1.7 1.8 1.9 GDP NGNbn 145,639 154,252 182,583 211,031 GDP $bn 404 405 442 463 Population 201 206 211 217 Stock of bank credit to private sector (NGNbn) 25,254 27,149 29,863 32,850 Stock of bank credit to priva
Slide 13: New Nigeria Indicators
NEW NIGERIA INDICATORS Today, we are broadcasting our new GDP forecasts based on a higher oil price of $80 in 2022 and 2023 (previously $65 and $60). GDP growth should be 3%, or 4% if oil stays at $90 The current account goes into surplus which 1) supports the naira and 2) helps reduce interest rate
Slide 14: Spot Rates vs REER Fair-Value Estimates - Africa Feb 2022
SPOT RATES VS REER FAIR-VALUE ESTIMATES – AFRICA 2 FEB 2022 Standard deviations FX rate implied by FX rate if REER Long-term IMF 2021E away from One-year local Current FX long-term average falls to previous Date of average divided C/A (% IMF 2022 C/Ahistoric Yvonne's avg. RenCap Dec- currency Latest
Slide 15: Naira/$ Rate Depends on Inflation
NAIRA/$ RATE DEPENDS ON INFLATION If we assume our REER estimate is accurate, and that inflation will be about 10% a year vs 1-2% in the US – then the naira will need to depreciate by perhaps 7% a year. This assumes productivity rises 1% faster in Nigeria than in the US (debateable). This would put
Slide 16: Nigeria's Elections
NIGERIA’S ELECTIONS Likely to impact investment in 2022 Base case is democracy is secure in Nigeria (roughly 95% chance annually of remaining a democracy, far higher than many others in west Africa) Hopes for a market-friendly policy stance in 2023 from the new president Challenges will include the
Slide 17: Africa in 2018 by GDP
AFRICA IN 2018 GDP of AFRICA in 2018 (US$bn) with each box representing $2bn of GDP Polity IV rankings for 2017 (or Freedom House, 2018) BY GDP Morocco Algeria Tunisia Data via Renaissance Capital US state GDP vs African economies in 2019, US$bn Nigeria joined the Libya Egypt California 3,053 Connec
Slide 18: Map of Africa by population and literacy rate
RENAISSANCE CAPITAL - Map of Africa by population size, 2020 (IMF) and literacy rate, latest up to 2018 (UNESCO) Other Frontier Argentina Tunisia Libya Egypt Bangladesh Morocco Algeria Pakistan Sri Lanka Niger Vietnam W.S M auritania Chad Mali Sudan Papua New Guinea So Senegal Kat Yo Eritrea C.V Ji
Slide 19: Map of Africa by population and electricity consumption
RENAISSANCE CAPITAL - Map of Africa by population size, 2017 (IMF) (each box is 1m people) for Africa and other FM (top-right) and electricity consumption in 2015 (kwh per capita via the IEA and EIA) Other Frontier Argentina Tunisia Libya Egypt Bangladesh Morocco Algeria Pakistan Sri Lanka Niger Vie
Slide 20: Africa in 2020 by Population
AFRICA IN 2020 BY POPULATION Population 2020 (UN), Fertility Rate 2020-25 (UN, 2019 estimates) - via RENAISSANCE CAPITAL Bangladesh Cambodia India Libya Indonesia Tunisia Egypt Pakistan Morocco Algeria Philippines Population table (2017) Sri Lanka Vietnam Nigeria 189 Illinois 13 Louisiana 5 Montana
Slide 21: Deposits Jump When Fertility Falls
DEPOSITS JUMP WHEN FERTILITY FALLS Bank deposits as % of GDP at Total Fertility Rate clusters, countries less than 50% of US GDP per capita 70% Bangladesh China India 60% Egypt Indonesia Deposits to GDP, 2015-2018 average Ghana Morocco Deposits to GDP vs total fertility rate Kenya 50% SA 512% Pakist
Slide 22: Bank Lending (% of GDP) - The CFA/Eco Advantage
BANK LENDING (% OF GDP) – THE CFA/ECO ADVANTAGE Three themes in Africa - higher debt in richer countries, Moroccan style rises in Senegal/Ivory Coast and stagnation in Anglophone Africa 120% 111% Debt labels for 2007 100% 91% 93% 88% 87% 81% 77% 80% 60% 60% 50% 39% 39% 40% 31% 27%28% 25% 26% 19% 22%
Slide 23: Morocco vs Nigeria - A Fertility Story
MOROCCO VS NIGERIA – A FERTILITY STORY Interest rates reflect the quantity of deposits in the country unless you run a current account surplus, via a cheap currency or (in Nigeria’s case) an oil price boom. Rates can be manipulated downwards temporarily, but that usually triggers inflation. To have
Slide 24: When Will Fertility Fall Below 3
WHEN WILL FERTILITY FALL BELOW 3 The emerging markets investment firm 23
Slide 25: What Can Be Done?
WHAT CAN BE DONE ? The emerging markets investment firm 24
Slide 26: Not Just About Money
NOT JUST ABOUT MONEY The emerging markets investment firm 25
Slide 27: As Fertility Falls, Economy Improves
AS FERTILITY FALLS, ECONOMY IMPROVES When fertility stays high, savings are in short supply, so there is no investment and a shortfall in jobs. The constant cry is “Where will the jobs come from?” When fertility falls, savings rise, so investment rises and this creates new jobs. The bottom chart wou
Slide 28: GDP Growth - A Dependency Ratio Story
GDP GROWTH – A DEPENDENCY RATIO STORY The emerging markets investment firm 27
Slide 29: Frontier vs EM - Ratios
FRONTIER VS EM – RATIOS 1960 1965 1970 1975 1980 1985 1990 1995 2000 2005 2010 2015 2020 2025 2030 2035 2040 2045 2050 2055 2060 2065 2070 Bahrain 1.3 1.1 1.1 1.4 1.7 1.8 1.9 2.1 2.1 2.6 3.5 3.3 3.8 3.6 3.5 3.3 3.1 2.9 2.8 2.6 2.5 2.2 1.9 Bangladesh 1.2 1.2 1.1 1.1 1.1 1.1 1.2 1.3 1.5 1.6 1.7 1.9 2.
Slide 30: $147bn Dollars (More Equity Please)
$147BN DOLLARS (MORE EQUITY PLEASE) The emerging markets investment firm 29
Slide 31: We Need Export Growth
WE NEED EXPORT GROWTH The emerging markets investment firm 30
Slide 32: But There Are Limits
BUT THERE ARE LIMITS The emerging markets investment firm 31
Slide 33: C/A Surplus or High Deposit Base = Low Interest Rates
C/A SURPLUS OR HIGH DEPOSIT BASE = LOW INTEREST RATES Real interest rates over time (%) All Under 40% GDP of Over 40% of GDP of countries bank deposits bank deposits 5yr subsequent average real interest rates (lhs) Current vs Deposits to GDP in 2013 (bottom axis) account surplus -0.1 -0.2 -0.1 8.0 Y
Slide 34: Nigeria's Cheap Equity Market Gives Good Yield
NIGERIA’S CHEAP EQUITY MKT GIVES GOOD YIELD One of the cheapest Frontier markets with a p/e ratio of 7, below its 10 year average. It also has one of the highest dividend yields, and they’ve above the 10-year average. The ideal combination for local investors. 12M fwd P/E 10y avg 12M fwd P/E 10y avg
Slide 35: Conclusions
CONCLUSIONS • After beating most of the world in terms of GDP in 2020, Africa’s 2021 recovery was obviously less dramatic than elsewhere. But a recovery is underway and Nigeria is getting an extra boost from oil. • The long-term structural drivers of growth remain education, electricity and fertilit
Slide 36: Disclaimer
DISCLAIMER This Communication is for information purposes only. The Communication does not form a fiduciary relationship or constitute advice and is not and should not be construed as a recommendation or an offer or a solicitation of an offer of securities or related financial instruments, or an inv
Slide 37: 2021 Market Recap & 2022 Outlook
2021 MARKET RECAP & 2022 OUTLOOK Temi Popoola CEO, Nigerian Exchange Limited 03 February 2022 NAME OF PRESENTATION | Thursday, 03 February 2022 | 1
Slide 38: Global Market Review
GLOBAL MARKET REVIEW Global equities markets reflected positive sentiment boosted by the rollout of COVID-19 vaccines. General global economic recovery and recovery in corporate earnings spurred major indices around the world to end the year in the positive. Select Global Index Performance (%) 1.3 S
Slide 39: NGX Strategic Performance
NGX STRATEGIC PERFORMANCE § In March 2021, history was made as The Nigerian Stock Exchange (NSE) completed its demutualisation process, following statutory approvals from the Securities and Exchange Commission and Corporate Affairs Commission (CAC). § With demutualisation, NSE transitioned into a no
Slide 40: 2021 NGX Market Performance - Equities Market Review
2021 NGX MARKET PERFORMANCE – EQUITIES MARKET REVIEW § NGX’s flagship index, NGX All Share 2021 NGX Indices Performance - % Change Index returned 6.1%, driven by recovering corporate earnings and improved investor NGX Oil/Gas Index 52.5% sentiments. NGX Growth Board Index 28.0% NGX AFR Div Yield Ind
Slide 41: 2021 NGX Market Performance - Fixed Income Market Review
2021 NGX MARKET PERFORMANCE – FIXED INCOME MARKET REVIEW § Market Capitalization grew by 12.81% Fixed Income Market Capitalization 20.0 19.74 19.74Tn in 2021. Trillions 19.5 19.0 .8 1% § Significant uptick in Turnover value to 12 18.5 N3.52Bn in 2021. This represents an increase of 158.19%. 18.0 17.
Slide 42: 2021 NGX Market Performance - ETF Market Review
2021 NGX MARKET PERFORMANCE – ETF MARKET REVIEW § The ETF Market Capitalisation fell from ETFs Market Capitalization (N'Bn) N24.51Bn in 2020 to N7.35Bn in 2021 representing a 70% decline in the Market Capitalization of Exchange Traded Funds. 24.51 § The decline in the market capitalisation can be at
Slide 43: NGX Strategic Performance
NGX STRATEGIC PERFORMANCE § Customer Experience: In line with the Exchange’s drive to develop and improve the digital experience for our stakeholders, the Exchange launched the maiden edition of the Digital only version of the 2021 NGX annual Factbook (X-Factbook). § Operational Support for Market E
Slide 44: Outlook for 2022
OUTLOOK FOR 2022 Coming into 2022, the IMF forecasts that the global economy is 1 expected to grow by 4.9% in 2022 from an estimated 5.9% in 2021 Uncertainty about the global economy is at its highest since the early days of the pandemic. This is driven by fear of mutating variants of 2 the Coronavi
Slide 45: The Road Ahead - 2022 Plan
THE ROAD AHEAD – 2022 PLAN Post demutualization re-organization and business transformation: Business geared towards value creation for shareholders, retail investors, technology Transformation adoption, innovation competence and building a very robust marketplace 01 for capital market products and
Slide 46: Thank You
THANK YOU 2021 MARKET RECAP & 2022 OUTLOOK | Thursday, 03 February 2022 | 10
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