This conference, themed “Africa Evermore”, is an opportune time for us to engage with one another in open and constructive dialogue about our current operating environment, and how to go about closing the gaps in our journey to attain the full promise of Africa’s economic potential.
Compared to this year’s performance, growth in sub-Saharan Africa is projected to pick up in 2016 by 0.5 percentage points to 4.3 per cent according to the IMF’s World Economic Outlook. This growth is expected to be supported by moderate global recovery, and growth in low-income developing countries which compared to this year are projected to grow by one more percentage point to 5.8 per cent in 2016. Africa’s positive outlook is just one of the many opportunities that if well harnessed could seriously position the continent for greater heights.
Our markets currently cover multiple asset classes from equities and bonds to ETFs and derivatives. In 2015 year to date, African exchanges collectively have traded over $325.0 billion in equities, $1.2 trillion in bonds, and $438.0 billion in ETFs & Others, representing a market capitalization of over $1.3 trillion. In terms of governance and ownership structure, several of our exchanges are demutualized, while others are in the process of demutualizing. Today, our exchanges are becoming active players in the global exchange business, and the conference theme “Evermore” is about sustaining that growth position, and becoming a real platform for growth in the African economy.
The role of the capital market remains a critical one and I believe that it is time to ask the tough question of how we can sustain the positive growth trajectories of our performances as African exchanges, given the globalization of the securities business. It is my strong belief that one of the things that Africa needs to sustain its growth, is a solid capital markets ecosystem that will attract investment and unlock the potential that exists on the continent.
How do we, as capital market businesses, operate and grow in a sustainable and socially responsible way? What I would like this conference to deliver is a better understanding of: 1) how best to pursue social values, without losing sight of the traditional financial objectives of our businesses; and 2) the correlation between the health of our economies, and the value of our capital markets, bearing in mind peculiar strengths, that individually and collectively we could leverage as we press forward.
One of Africa’s greatest strengths is its population of 1.1 billion people, 200 million of whom are aged between 15 and 24, making Africa the continent with the youngest population in the world. The current trend indicates that this figure will double by 2045. Similarly, Africa’s middle class has tripled in size to 313 million people or roughly 30% of the population over the last 30 years, and it is projected that this figure will reach 1.1 billion by 2060.
We anticipate a positive shift in demand as a result of this statistic, and African exchanges are already positioning themselves to do a lot more to service the increasingly sophisticated needs of our growing middle class. Our customers will be looking to sustain and grow their wealth, and will be looking to work with us in preparation for the transfer of that wealth. Therefore I encourage all of us as capital market players to ramp up on our efforts, as we prepare ourselves to meet our clients at their points of need.
Furthermore, among the 23 nations that make up ASEA, we have a combined total of just-over 1,600 listed companies, this number is negligible compared to the actual number of successful companies operating on the continent, or the over 1.5 million businesses registered in Africa. I propose we find new ways to engage with business leaders in order to communicate more clearly the vital role we play in facilitating long-term financing, mobilizing resources, and directing the flow of savings and investments efficiently within our economies.
An even more incredible potential, one which I am particularly passionate about is the exponential benefits that accrue from risk-sharing initiatives. Internationally, integrated stock markets improve resource allocation and accelerate growth by facilitating liquidity. Although profitable investments sometimes require long-run commitments to capital, savers prefer not to relinquish control of their savings, and preferably not for long periods of time.
This is where liquidity comes in to ease the investor’s tension. It does this by providing investors with assets that are easily liquidated at any time, while simultaneously allowing firms permanent access to capital that is raised through equity issues. In this regard, I believe that there is no better time than now to intensify our efforts in ongoing initiatives that foster the advancement of regional integration and cooperation.
These sub-regional integration efforts such as WACMI in West Africa, CoSSE in Southern Africa, and EAC in East Africa must be encouraged. We must also begin to study how to effectively link the entire region. Hence, the African Exchanges Linkage Project (AELP) which is a jointly owned mandate between ASEA and the Africa Development Bank (AfDB), is a step in the right direction. It is aimed at addressing the lack of liquidity in African capital markets by creating linkages across key regional markets to reduce fragmentation and information asymmetry.
All of these efforts to deepen the continent’s markets will aid in pushing Africa’s economic transformation, and enhancing national competitiveness. But we must be careful to never lose sight of the real objective of these initiatives, which is to stimulate opportunities for the investment community, and expose issuers to deeper pools of capital, and a wider community of analysts and investors pools.
Weak corporate governance is often found responsible for many of the corporate failures in Africa. However, as securities exchanges, we operate powerful platforms through which we can influence and promote sustainable business practices. Accordingly, we must increase our contribution and participation in developing our national codes of corporate governance, by setting strong listing and maintenance requirements, and ensuring adequate disclosure of listed companies’ corporate governance arrangements.
Africa is becoming known as the continent that leapfrogs traditional stages of growth or development. We have seen this in the telecommunications industry where despite insurmountable challenges with communications infrastructure, the impact of mobile phone technology in Africa has been phenomenal, and is now revolutionizing many other sectors of our economy. When it comes to mobile phone technology, Africans are doing great things and leapfrogging the West, ironically driven by a lack of infrastructure.
Mobile payment systems experienced phenomenal growth in Kenya because many Kenyans did not have bank accounts, but they had mobile phones. Here in South Africa, the innovation of mobile commerce where you can order something on your phone and pick up from a locker is growing in popularity, and the driver for this is the limited number of physical malls. As a result of poor infrastructure in the health space, Africans are yet again turning to mobile technology for health information on platforms such as Mobile Alliance for Maternal Action (MAMA).
This trend is no different in how quickly the continent has embraced innovations in renewable sources of energy. Between 2010-2012, Nigeria’s renewable power production posted the world’s fastest growth, at more than 15% a year, according the World Bank. I therefore call on my colleagues in the capital market space to do no less in the capital market. Let us be aware of our opportunities and tremendous capabilities and get involved in understanding what emerging technology can do for our sector, from blockchain technology to advancements in cyber security.
I have no doubt that the programme at this year’s conference will surely drive the level of engagement and idea generation that will solidify and strengthen our association’s strategic resolve. But more importantly, I believe that the learnings from our interactions will elevate our business strategies to ride out the headwinds that our markets have experienced this year. In the end, I sincerely hope that we are better positioned to unlock our continent’s growth potential, and empowered to advance the development of our capital markets.
Thank you for your attention and for your anticipated contributions to the dialog during this conference. Once more, I welcome you all to the ASEA Conference 2015, and I wish us all fruitful deliberations.
•Oscar, President, African Securities Exchanges Association (ASEA) presented the speech at the associaton’s 19th annual conference in South Africa, last week.
Nigeria Borrows $4 Billion Through Eurobonds as Order Book Peaked at $12.2 Billion
The Federal Government of Nigeria has raised a fresh $4 billion through Eurobonds, according to the latest statement from the Debt Management Office (DMO).
Nigeria had set out to raise $3 billion but investors oversubscription peaked at $12.2 billion, enabling the Federal Government to raise $1 billion more than the $3 billion it announced.
DMO said “This exceptional performance has been described as, “one of the biggest financial trades to come out of Africa in 2021” and “an excellent outcome”.
Bids were received from investors in Europe, America, Asia and several local investors. The statement noted that the quality of investors and the size of the Order Book demonstrated confidence in Nigeria.
The Eurobonds were issued in three tranches, details, namely seven years–,$1.25 billion at 6.125 per cent per annum; 12 years -$1.5 billion at 7.375 per cent per annum as well as 30 years -$1.25 billion at 8.25 per annum.
The DMO explained that the long tenors of the Eurobonds and the spread across different maturities are well aligned with Nigeria’s Debt Management Strategy, 2020 –2023.
The Eurobonds were issued as part of the New External Borrowing stipulated in the 2021 Appropriation Act. DMO noted that the $4 billion will help finance projects state in the 2021 budget.
Nigeria’s total debt stood at $87.239 billion as at March 31, 2021. However, with the $4 billion new borrowing, the nation’s debt is now $91.239 billion. A serious concern for most Nigerians given the nation’s weak foreign revenue generation and rising cost of servicing the debt.
CIBN Banking and Finance Conference 2021: Structural Transformation and Growth
Today we highlight one of the sessions, ‘Economic Recovery’, at the recently concluded CIBN Banking and Finance conference. This was a hybrid event in Abuja, Lagos and partially virtual last week. The Covid-19 disruptions have created demand and supply shocks in the global system while unlocking new opportunities for growth.
Given the pre-existing financing challenges and growing spending needs, many developing countries are in dire need of financial support. As a result of the pandemic, the financing gap for the sustainable development goals increased by 70% (over USD4.2bn). The speaker on this session, Amina J. Mohammed, Deputy SecretaryGeneral of the United Nations and Chair of the United Nations Sustainable Development Group focused on structural transformation, technology, finance and sustainability.
Recent developments such as the allocation of the USD650bn in Special Drawing Rights (SDR) were highlighted during the session. Although the SDR offers improved liquidity into the system, Africa is set to receive only USD32.2bn (or 6.4% of the total amount). Therefore, it is important that the funds are channeled towards well-targeted sectors that can contribute to sustainable development.
The banking and finance sector plays a crucial role. The Africa Continental Free Trade Area (AFCFTA) agreement offers an opportunity for the financial sector to work within a continental market of 1.2 billion people. According to Amina J. Mohammed, three main actions areas will reshape the financial sector and support stronger recovery.
The first, better customer engagement with a dynamic range of relevant products and services that go beyond bank-based financing mechanisms and offer innovative financial products tailored to specific needs of business ecosystems. Second, the adoption of new operating models to drive efficiency and inclusion. Third, a deliberate focus on enabling sustainable development investing.
Furthermore, Nigeria’s banking and finance industry is well positioned to drive specific UN sustainable development goals such as inclusive and affordable credit, especially for micro, small and medium-sized enterprises. The industry can also provide support towards climate change.
Technology also featured in the discussion points. Undoubtedly, technology is a catalyst for growth across economies and the pandemic has further exposed the deficit within the sector across developing countries. Investments in digital infrastructure need to be rapidly expanded and scaled up to boost socio-economic development.
The speaker commended the FGN’s efforts on its push towards sustainable economic recovery. Some policy and regulatory reforms highlighted include, regulation of fintechs and related services to strengthen payment systems and regulate data protection; the green bonds which Nigeria first issued in 2017 in support of green projects, including solar energy and the modernisation of the Nigerian stock exchange that has given rise to a new operational structure and leadership.
These are laudable steps. However, we note that there is still room for improvement. To achieve double-digit GDP growth and sustainable development, structural transformation should remain on the FGN’s priority list.
FG Plans To Deliver 15 Projects Across The Country With $4B Foreign Loans
Nigeria’s Presidency has explained that a total of 15 projects, spread across the six geo-political zones of the country, are to be financed with more than $4 billion from multilateral institutions.
Malam Garba Shehu, Senior Special Assistant to the President on Media and Publicity stated on Saturday in Abuja that the loan is under the 2018-2021 medium-term (rolling) external borrowing plan.
He revealed that President Muhammadu Buhari had already requested the Senate to approve sovereign loans of $4.054billion and €710million as well as grant components of $125million for the proposed projects.
He quoted the letter by the president as saying that the sovereign loans will be sourced from the World Bank, French Development Agency (AFD), China-Exim Bank, International Fund for Agricultural Development (IFAD), Credit Suisse Group and Standard Chartered/China Export and Credit (SINOSURE).
He said: “The President’s request to the Senate listed 15 proposed pipeline projects, the objectives, the implementation period, benefiting states, as well as the implementing Ministries, Departments and Agencies (MDAs).
“A breakdown of the Addendum to the Proposed Pipeline Projects for the 2018-2021 Medium Term (rolling) External Borrowing Plan shows that the World Bank is expected to finance seven projects including the $125million grant for ‘Better Education Services for All’.’’
According to him, the Global Partnership for Education grant is expected to increase equitable access for out-of-school children and improve literacy in focus states.
He expressed the hope that the grant, which would be implemented by the Federal Ministry of Education and the Universal Basic Education Commission (UBEC), would strengthen accountability for results in basic Education in Katsina, Oyo and Adamawa States.
Other projects to be financed by the World Bank, according to Shehu, are the State Fiscal, Transparency, Accountability and Sustainability Programme for Results as well as the Agro-Processing, Productivity, Enhancement and Livelihood Improvement Support Project.
He said the benefiting states for the agro-processing project included, Kogi, Kaduna, Kano, Cross River, Enugu and Lagos with the Federal Ministry of Agriculture and Rural Development as the implementing ministry.
The presidential aide stated that the objective of the project was to enhance the agricultural productivity of small and medium-scale farmers and improve value addition along priority value chains in the participating states.
Shehu added that the World Bank would also be financing the Nigeria Sustainable Water Supply, Sanitation and Hygiene (WASH) project in Delta, Ekiti, Gombe, Kaduna, Katsina, Imo and Plateau States, for the next five years.
According to him, the project, when completed, is expected to improve rural water supply, sanitation and hygiene nationwide towards achieving Sustainable Development Goals (SDGs) for water supply and sanitation by 2030.
“Under the external borrowing plan, the World Bank-supported projects also include Nigeria’s COVID-19 Preparedness and Response Project (COPREP), under the supervision of the Federal Ministry of Health and Nigeria Centre for Disease Control (NCDC).
“The project, which has an implementation period of five years, will respond to threats posed by COVID-19 through the procurement of vaccines.
“Furthermore, no fewer than 29 states are listed as beneficiaries of the Agro-Climatic Resilience in Arid Zone Landscape project, which is expected to reduce natural resource management conflicts in dry and semi-arid ecosystems in Nigeria,’’ he said.
He gave the names of the benefiting states for the project to be co-financed by the World Bank and European Investment Bank (EIB) to include: Akwa Ibom, Borno, Oyo, Sokoto, Kano, Katsina, Edo, Plateau, Abia and Nasarawa.
Others are; Delta, Niger, Gombe, Imo, Enugu, Kogi, Anambra, Niger, Ebonyi, Cross River, Ondo, Kaduna, Kebbi, Jigawa, Bauchi, Ekiti, Ogun, Benue, Yobe and Kwara.
He said the World Bank would also be funding the Livestock Productivity and Resilience project in no fewer than 19 states and the Federal Capital Territory (FCT) while the China EXIM Bank is expected to finance the construction of the branch line of Apapa-TinCan Island Port, under the Lagos-Ibadan Railway modernisation project.
Shehu said: “The French Development Agency will finance two projects, which include the National Digital Identity Management project and the Kaduna Bus Rapid Transport Project.
“The digital identity project will be co-financed with World Bank and EIB.
“The Value Chain Development Programme to be financed by IFAD and implemented in Anambra, Benue, Ebonyi, Niger, Ogun, Taraba, Nasarawa, Enugu and the Kogi States will empower 100,000 farmers, including over 6,000 and 3,000 processors and traders, respectively.
“The loan facility to be provided by European ECA/KfW/IPEX/APC will be spent on the construction of the Standard Gauge Rail (SGR) linking Nigeria with Niger Republic from Kano-Katsina-Daura-Jibiya-Maradi with branch to Dutse.
“The specific project title, Kano-Maradi SGR with a branch to Dutse, has an implementation period of 30 months and will be implemented by the Federal Ministry of Transport.
“The Chinese African Development Fund through the Bank of China is expected to provide a loan facility of $325 million for the establishment of three power and renewable energy projects including solar cells production facility Phase 1 & II, electric power transformer production, Plants 1, II, III and high voltage testing laboratory.
“The National Agency for Science and Engineering Infrastructure (NASENI) will implement the project aimed at increasing local capacity and capability in the development of power and renewable energy technologies and infrastructure,’’ he further disclosed.
Shehu revealed that Credit Suisse would finance major industrialization projects as well as micro, small and medium enterprises schemes to be executed by the Bank of Industry.
He said the SINOSURE and Standard Chartered Bank would also provide funds for the provision of 17MW Hybrid Solar Power infrastructure for the National Assembly (NASS) complex. “The project, with an implementation period of five years, is expected to address NASS power supply deficit and reduce the higher overhead burdensome cost of running and maintaining fossil fuel generators (25MW installed capacity) to power the assembly complex,’’ he added.
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