Welcome Address at the 6th Edition of the Annual Standard Bank West Africa Investors’ Conference

NIGERIA: From Promise to Progress

It is with great pleasure that I welcome you to Nigeria for the sixth edition of the Standard Bank West Africa Investors’ Conference, which continues to be the conference of choice for investors seeking up to date insights into market-shaping events and trends in Nigeria. As portfolio investors in frontier and emerging markets, many of you have been on this Nigerian journey with us for several years as we have navigated through the boom, bust and recovery of the Nigerian equity markets. This year, we can add ‘unprecedented political transition’ to that list of seasons as we concluded all important elections in the first quarter of the year and witnessed an opposition party electoral triumph at the centre for the first time in Nigeria’s history. This important development in our political landscape, as well as Nigeria’s many other well documented endowments/advantages underscore the Nation’s promise as the largest economy on the African continent.

This year’s conference has been aptly themed Nigeria: From Promise to Progress. Nigeria has gained significant political goodwill both at home and abroad on account of its unprecedented yet peaceful political transition at the Federal level. We at Stanbic IBTC Holdings plc believe that Nigeria’s leadership must ‘midwife’ sustainable progress from this place of promise in which we now stand. This delicate process has been made more challenging on account of a sharp shift in the global economic context in which Nigeria is operating at present, given the end of the commodities boom and the sharp reduction in global commodity prices, including crude oil on which our economy has been so dependent. It is no secret that in recent years, Nigeria derived close to 70% of its Federal Government budgetary revenues and 90% of its foreign exchange earnings from crude oil sales and that both price and production levels have fluctuated below desired levels. Efforts at economic diversification are still at a relatively early stage of execution and this has created a very challenging backdrop for policy makers to operate against.

Despite this, we must find a way to steady the ship and grow the pie as a matter of utmost urgency. We are a populous and youthful nation that is endowed with a vibrant private sector. This presents both a tremendous investment opportunity as well as a worrying spectre of instability if resources and expectations are not properly managed.

We believe that the sharp change in economic realities requires decisive policy steps to address the “new normal”, as it is unlikely that an improvement in execution efficiency along
the previous trajectory alone will deliver the quantum of new investment activity, economic growth and job creation that is urgently needed to meet the yearnings of the populace. This also brings us to another critical point; the need for partnerships and
collaboration. We believe Nigeria needs to find ways for public and private capital to effectively collaborate in order to deliver the tangible economic progress that is urgently required. This has been made all the more important on account of the sharp reduction
in government revenues, the high recurrent expenditures and the modest medium term outlook for revenue recovery as the global oil supply and demand dynamics appear to have shifted permanently on account of the emergence of U.S. Shale oil producers as the new swing producers.

If we acknowledge then that Nigeria must accelerate economic growth and job creation and also accept that public sector capital will be insufficient to deliver the kind of growth
needed, it makes it absolutely imperative that we articulate a clear, consistent policy direction that states Nigeria’s priorities upfront and makes the rules of engagement of private capital as clear as possible. These rules must also be holistic rather than
arbitrary and should not hinge on the unbridled fixation with keeping all inherited factor prices, subsidies and exchange rates constant. This is the challenge facing the economic team that the President will soon pick.

Of recent the Central Bank of Nigeria has used capital controls and other forms of foreign exchange rationing as well as some innovative bail-out arrangements as the dominant economic tool for responding to a wide variety of monetary and fiscal shocks, thereby increasing the uncertainty that investors face as they are unable to project or understand how some of these measures can be sustained over time in the absence of severe financial repression. In order for investor confidence to return quickly, the new administration must focus on espousing clear and credible policy prescriptions that address the following:

· 1) Credible pathway to fiscal stability: Revenues need to be sourced from places beyond oil without stifling an already fragile economy whilst spending must become much more efficient. The scope for fiscal stimulus is severely limited and so the most promising changes that will impact revenues must come via price adjustments in overly distorted markets such as those prevailing in segments of the downstream petroleum sector;

· 2) A framework for sustained infrastructural investment: Nigeria must see capital flows into its infrastructural sector, power chief among them, but for this to happen, the regulatory framework must be viable, relatively transparent and somewhat predictable. Domestic gas-to-power supply shortages and transmission bottlenecks must be addressed quickly;

· 3) Accelerated agricultural reforms: Nigeria needs significant investment into its agriculture sector, both in terms of R & D and capital. The sector is critical for diversifying the sources of FX, food security
and the support and development of SMEs and thus of much needed job creation across the country. This will help reduce the pace of urbanization and give cities the much needed breathing space to develop.

· 4) Oil & Gas sector investment still critical: Oil & Gas will remain critical to the government’s finances for some time to come and the ‘Gas’ part of this equation needs to be far more effective than it has been
in the past. This is critical for export revenues, supporting the power sector and creating a healthy value chain in sub sectors such as fertiliser, petrochemicals etc;

· 5) Viable, effectively executed industrialization plan: The transition from import dependency to domestic production cannot be instant but requires a steady expansion of the productive base within the country as well as systematic skills acquisition and investment in human capital to sustain it. The incentives to attract such investment need to be credible, clear and sustainable beyond the tenure of a single administration;

· 6) Resilient financial sector and continued Capital Market development: Financial institutions are essential to support the nation’s growth ambitions. They must be able to appropriately balance risk and return as they grow, while attaining the resilience to support the economy. For companies that are already relatively well established in the formal sector, both indigenous and foreign companies alike, access to capital on acceptable terms remains crucial if they are to continue to grow, backward integrate and create jobs.

We hope to address some of these issues over the coming days that you are here with us. In order to help us with this, we have with us here Dr. Doyin Salami, a renowned economist who was the Vice-Chairman of the transition committee assembled by President Buhari and he remains a member of the MPC committee. He will give the opening keynote address and help set the tone for the next three days.

In addition to the one on one meetings with corporate management teams that are a mainstay of your time with us, we have also introduced thematic roundtables that we believe will help to address some of these overarching issues – these are in your agendas of course but I will just highlight a few:-

We have the Nigerian Mortgage Refinance Company and PENCOM anchoring a round table on ‘Deepening the Nigerian Mortgage Market’ which should offer insights
into the prospect of addressing Nigeria’s much discussed 17m unit housing deficit, provide a new revenue stream for banks and help unleash the construction sector, which is critical for job creation.

The resident representative from the IMF, Mr. ‘Gene Leon will anchor a round table discussing his thoughts on Nigeria’s pathway to fiscal stability; this is the foundation of all our other endeavours.

We have an infrastructure roundtable entitled Delivering on infrastructure; perspectives on regulation and funding, anchored by Mr. Kunle Oyinloye, MD of the Infrastructure Bank and Mr. Ibrahim Sagna of the AFC through which you can gain real insights from practitioners in the sector on some of the milestones and challenges on their journey to determine how effectively we are closing this well documented gap.

We have an Agriculture sector roundtable entitled ‘Green shoots of economic diversification’ that will be anchored by corporates undertaking backward integration in accordance with government policy as well as those engaging with small holding farmers and co-operatives from a financing perspective. Are agricultural reforms really delivering? You will have an opportunity to engage them and judge for yourself.

Tomorrow evening, we look forward to hosting you at our Gala Night. We will have the opportunity to hear from the CBN Governor, Mr. Godwin Emefiele, the Executive Governor of Lagos State, His Excellency
Mr. Akinwunmi Ambode and the Vice President of the Federal Republic of Nigeria, His Excellency, Professor Oluyemi Osinbajo, SAN as they address the audience and take your questions.

We are confident that the high quality interaction that we envisage over the course of the next couple of days will enable you all to further deepen your understanding
of our rapidly evolving market and the opportunities herein. Once again, I am delighted to welcome you to Standard Bank’s Sixth West African Investor Conference and to remind you that our market leading equities brokerage and research teams are on hand to
guide and support you during your stay in Nigeria.

I thank you for your attention.

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