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A Presentation at the Sovereign Wealth Funds ForumJumeirah Carlton Towers, LondonFebruary 2009
WHAT’S NEXT FOR SWFs?
An African Strategy: A Case for Sub-Saharan Africa with Nigeria in Focus
2
I. SWFs – Where Next?
IV. Key Sector/ Industry Opportunities
III. The Investment Case for Nigeria
V. About BGL
II. Sub-Saharan Africa – What’s Behind the Growth Story?
Outline
3
SWFs – Where Next?
Although Sovereign Wealth Funds are not a new phenomenon, they have increased their influencein recent years, considering the growing role they have come to play in global financial markets. Itis estimated that the total assets under management currently exceeds US$ 3 trillion.
Sovereign Wealth Funds Investments by Sector: 1995-2008
SWFs – How do they invest and in what?
52
33
15
47
23
30
SWF Private Equity Investments
SWF Private Real Estate Investments
SWF Investing SWFs Not Investing Unknown
Out of a total of 51 funds, about 52% and 47% are confirmed to be investing in private equity and private real estate respectively. Although the
involvement of some SWFs in Private Equity (15%) and Real Estate and (30%) is unknown, its likely that
about half of them invest in these asset classes
Source: Preqin Ltd
4
SWFs – Where Next?Which geographies are they moving to?
• SWFs in the Gulf are switching their focusaway from Western markets to shore up ailingeconomies in the Middle East and protectthemselves from further losses on Wall Street.
• Investment funds in Kuwait, Qatar, Dubai andAbu Dhabi are understood to be changingtheir investment strategies and locationsfollowing the large losses in the West
In Q2 2008, more than half of the SWFsdeals and funds invested were in emergingmarkets. SWFs carried out 26 deals andinvested $15 billion in BRIC and non–OECDcountries
The Kuwait Investment Authority (KIA) hasshifted $4 billion (£2.6 billion) from Westernmarkets into its own bourse.
The Qatar Investment Authority (QIA) hasbegun a bailout of local banks.
Dubai International Capital (DIC) isconcentrating its investment efforts onemerging markets.
Sameer al-AnsariChief Executive, DIC
“…Given the crisis that we are in, the governments in the region have to use their money wisely. That means investing in infrastructure and long-term
projects good for the region and also to look outside the region to diversify, acquire, to buy strategic
assets.”
5
SWFs – Where Next?Africa roll call…
?"If the World Bank Group can help create the platforms and benchmarks for the investment
of even 1% of their wealth funds assets; it would draw $30 billion to African growth,
development and opportunity,"
Robert Zoellick.President, World Bank
Mubadala & Istithmar have investedsignificantly in Nigeria’s telecomssector; power stations & oil and gasprojects in Algeria, as well as inGuinea’s aluminum and oil industry
1 2 3
4 5 6
Dubai Investment Company (DIC)through Dubai World Africa has madesignificant investments in Africafocusing on Hospitality, Tourism, RealEstate and Maritime/ Shipping Sectors
Abu Dhabi Investment Authority (ADIA)currently has an 8% stake in the Egyptianinvestment bank EFG Hermes. It also hassignificant stakes in North Africancompanies like Tunisia Telecom (about17.5%).
The Abu Dhabi Investment Companythrough UBS Global Asset Mgt isinvesting about $500 million in schoolprojects in Egypt
Libya Investment Authority (LIA)through the Libyan Oil HoldingCompany has invested over $300million in oil infrastructure in theDemocratic Republic of Congo
LIA has through various secondaryinstitutions have also invested indiverse sectors in Gambia, Mali, Niger,Chad, Guinea, Togo, Liberia, Ghana,South Africa and a host of others
Sub Saharan Africa – What’s Behind the Growth Story?
7
Sub Saharan Africa – The Growth StoryWhat’s Changing in Africa?
Key Economic trends• GDP Growth has averaged 6% since 2004
compared to less than 3% in last 30 years.
• Average inflation – 7.9% (excluding Zimbabwe)
• South Africa & Nigeria account for over 50% of Africa’s GDP
• Foreign reserves risen from $26bn in 1996 to $150bn in 2007
• Boasts 15% of worlds population and yet contributes only 2% of global output
• Raw materials account for 60% of exports
• Share of World Exports risen from a low of 1.8% in 1998 to 2.5% in 2006
• FDI Inflows in 2007 $53Bn vs. $10bn in 1999
• China – committed to investing $20bn over the next 5 years
• 17 equity markets in 2007 compared to 4 in 1990. Combined Market Cap ex SA was $250bn (end 2007) compared to $58bn in
2000
What’s changing in Africa•Commitment to fighting corruption &
encouraging democracy
•Improving legal structures
• Easing bureaucratic regulations and upgrading frameworks for developing trade
agreements,
•Developing infrastructure
•Developing capital markets and improving transparency
•Increasing Investor confidence
•Changing global attitudes
•Diaspora effect
Natural Resource Wealth• 40% of proven global Gold reserves
•30% of proven global Mineral reserves
•20% of proven global of Uranium reserves
•10% of worlds proven Oil & Gas reservesImproving
Fundamentals
Huge Upside Potentials
Last Frontier in the Emerging
Market Universe
8
Sub-Saharan Africa is blessed with a large share of the earth’s natural resources
The region has very significant reserves of commodities including bauxite, cobalt,gold, diamonds, platinum, titanium and zirconium
10% of the world’s proven oil reserves are in this region and at presentconsumption levels, these reserves are expected to last another 30 years
About 7% of the world’s proven gas reserves lie in Sub-Saharan Africa (Nigeria,Ghana, Cote-d’Ivoire) and are expected to last 80 years more
12% of the world’s arable land is in Africa, Sub-Saharan Africa accounting for xx%of the total arable land in Africa. By making agriculture the mainstay of theeconomy, there exists a huge potential to tap into this sector and position Sub-Saharan Africa as a global agri hub
Sub-Saharan Market SpaceSub Saharan Africa – The Growth Story
9
58.3
38.4
30.124.4
14.512.912.4
0
10
20
30
40
50
60
70
2000 2001 2002 2003 2004 2005 2006
($bn)
5,323
2,8512,268
1,581855957635
9.1%
7.4%7.5%6.5%
5.9%
7.7%
4.9%
0
1,000
2,000
3,000
4,000
5,000
6,000
0%
2%
4%
6%
8%
10%
2000 2001 2002 2003 2004 2005 2006
Market Turnover as a % of Market Capitalisation
($m)
522522520508491478460456
109109867160413534
0
100
200
300
400
500
600
700
2001 2002 2003 2004 2005 2006 2007
490 495 519551 579 606 631 631
Number of Listed equities Equities Capped at> 100m
Oil and GasMetals and MiningOthers
TMTIndustrial and Manufacturing
Construction and Real Estate
Retail and Consumer
Financials48%
18%
10%
6%4%
9%1%4%
Sub-Saharan Africa: Market Capitalisation Sub-Saharan Africa: Market Turnover
Sub-Saharan Markets: Sector Split Sub-Saharan Africa: Number of listed stocks
Sub Saharan Africa – The Growth StorySub-Saharan Market Space
10
Sub Saharan Africa – The Growth StorySub-Saharan Market Space
(7%
)
(6%
)
(5%
)
(5%
)
(4%
)
(4%
)
(3%
)
(3%
)
(3%
)
(3%
)
(2%
)
(2%
)
(2%
)
0%0%1%2%3%4%
10%
(15%)
(5%)
5%
15%
Nig
eria
Cam
eroo
n
Leso
tho
Nam
ibia
Rw
anda
Bots
wan
a
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h Af
rica
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i
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n
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ina
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Keny
a
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na
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agas
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Gam
bia
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gal
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Ver
de8%8%9%
11%
11%
12%14
%15%
15%
16%17
%
18%
0%
5%
10%
15%
20%
25%
Tanz
ania
5yr
s
Mal
awi 2
73da
ys
Moz
ambi
que
1yr
Zam
bia
5yrs
Gha
na 5
yrs
Uga
nda
5yrs
Bots
wan
a 5y
rs
Keny
a 5y
rs
Mau
ritiu
s 5y
rs
Nig
eria
5yr
s
Nam
ibia
1yr
Sout
h Af
rica
8yrs
Average: 13%
25%20%
60%
110% 40%40%
80%100%
0%
20%
40%
60%
80%
100%
120%
0%
20%
40%
60%
80%
100%
120%
2005 2006 2007 2008
Debt Outstanding as a % of GDP Debt Service as a % of Exports
BB+
BB-BB
Baa2A-
AAA+
AAA
0
2
4
6
8
10
Sing
apor
e
Sout
hAf
rica
Bots
wan
a
Thai
land
Rus
sia
Mau
ritiu
s
Ukr
aine
Nig
eria
Gha
na
Uga
nda
Fiscal balance as a% of 2006 GDP
Cost of Capital is Fair Across Nations Debt Servicing Capacity Improving
Fiscal Balance positive for many nations Credit Ratings Improving
The Investment Case for Nigeria
12
• Most populous country in Africa and 8th Most populous in the world withpopulation of over 140million people – over 50% of the population is under theage of eighteen (18)
• 32nd largest country in the world• Natural resources include; natural gas, petroleum, tin, zinc, bitumen, limestone• Underexploited natural resources include; coal, bauxite, gold and limestone
• Achieved relative political stability with the successfultransition between democratically elected governments
• Improved human rights record• Competing ethnic groups contributes to occasional tension in
the polity• Reforms in all sectors are in progress and the outlook for the
polity is stable
• An emerging market with the 2nd largest stockexchange in Africa
• Average real GDP growth of 6% over the past fiveyears
• Increase of foreign reserves from US$5.4billion in1999 to over US$52.74 billion as at December 2008
• High crude oil prices has led to a excess crudesavings
• Naira is the currency to hold with a stable outlook• Positive outlook despite Capital market slowdown
• Increased transparency in budget approval and allocation process• Increased Due Process enforcement by the presidency• Present administration has a strong focus on the Rule of Law• Corruption is being successfully combated by The Economic and
Financial Crimes Commission (EFCC)
Eco
nom
ic
Pol
itic
al
Gov
erna
nce
Geo
grap
hic
A leading frontier market…The Investment Case for Nigeria
13
…with significant economic potentials despite the global crunch…The Investment Case for Nigeria
Nigeria, like many other emerging markets is not immune to the Global Financial Crises. TheNigerian capital market has witnessed a significant drop in value. Also, the decline in global oil priceshas affected the country’s foreign exchange earnings owing to its significant dependence on oil.However, the fundamentals of the economy and financial system are strong and well grounded…
Government is taking steps to
increase confidence in the
stock market
Government is continually working on diversification of
the economy
11.40%
65.80%
17.71%
0.88%
37.80%
74.86%
-46.31%-60.00%
-40.00%
-20.00%
0.00%
20.00%
40.00%
60.00%
80.00%
100.00%
2002 2003 2004 2005 2006 2007 2008
NSE Index Returns, 2002 to Date
Source: Nigerian Stock Exchange
14
… a positive macroeconomic outlook…The Investment Case for Nigeria
With Nigeria currently saving about US$4 billion on annual debt service payments since 2006,increased competitiveness in the financial system following the (2004/05) banking consolidation,a robust and well managed external reserve by CBN, a liberalised and private sector-ledeconomy, an active capital market as well as better fiscal and monetary policy regimes; Nigeriahas great opportunities to scale the hurdles posed by the global economic crisis.
GDP growth rate of between 4-5% is stillpossible and expected in 2009 despite theeconomic crisis.
Nigeria will continue to attract FDIs, particularlyin the oil and gas sector and portfolio inflowsdue to high returns to investment
The oil industry is expected to post a "swift andviolent rebound" in energy prices in the secondhalf of 2009
Lower world prices will benefit Nigeria becauseof her large imports. The country is set totarget strategic capital investment in sectorswhere input prices are depressed globally withlower freight costs
CBN is committed to stable exchange rateregime and monitor developments in the capitalmarket as a stable exchange rate wouldcontinue to be a major shock absorber for theeconomy to maintain its internal and externalbalance
Key Economic Indicators 2009 2010 2011 2012 2013Real GDP growth (%) 4.6 5.4 6.0 6.2 6.0Consumer price inflation (av; %) 10.3 9.2 8.3 7.7 7.4
Commercial banks' prime rate (av; %) 15.8 15.0 13.7 11.5 12.3
Forex Rates ($ to N)
Source: Economist Intelligence Unit, 2009
4.6%
3.5%4.0%
6.5%5.9%
5.0%
6.2%6.8%
0.0%
1.0%
2.0%
3.0%
4.0%
5.0%
6.0%
7.0%
8.0%
2001 2002 2003 2004 2005 2006 2007 2008
Nigerian Stock Exchange, 2009
GDP Growth Rate (%), 2002 to Date
15
Apart from boasting the largest population in the African Continent, estimated at 140million, the current
infrastructure inadequacy present significant opportunities for investors.
Country Return in Local Currency (%)
Return in US$ (%)
Egypt 51.2 56.4
Morocco 35.1 47.2
Nigeria 71.3 91.3Kenya -3.6 5.5
Tunisia 21.1 28.4
Botswana 35.9 34.1
Mauritius 80.6 110.9
Ghana 31.8 26.9
Zambia -7.9 8.8
Source: Securities Africa
Country Returns on Investment (2007)
Emerging Market
Stable and Favourable
Govt Support
Strong Market Fundamentals
and Markets with Superior Returns
NIGERIA An Investment Haven
+ +
=
…and favourable & attractive investment climateThe Investment Case for Nigeria
Merrill Lynch, in a recent report named Nigeria as the least vulnerable economy in the world largely owing to consistent
and sustained improvement in the nation’s fiscal management.
Nigeria has maintained a heavily low externalindebtedness, and consequently significantly reducedthe nation’s level of risk. The Government has alsoinstituted supportive polices to woo investors… Up to 5 years tax holiday – Pioneer Status Capital Allowances: Research & Development – use of local inputs – 140% Investment in infrastructure 20% of costs Minimum local raw materials utilization – 20% for 5 years
Very low VAT regime of 5%
Key Sector/ Industry Opportunities
17
Where are the opportunities in Nigeria?Key Sector/ Industry Opportunities
AGRICULTURE
OIL AND GAS
TOURISM & HOSPITALITY
TELECOMS
SOLID MINERALS
PHYSICAL INFRASTRUCTURE
18
Largest contributor to Nigeria’s GDP (40% of total GDP)
World’s largest producer of cassava (19% total production – over 40m tons)
Sub-optimal activity in the sector as most of the farming is subsistent
73% of the country’s land area consists of arable land
Implementation of commercial agriculture programmes to boost local production and increase export capacity
• Processing plants• Warehousing/ Agro-conditioning centres• Dairy Production• Tractor Assembly Plant
Based on importation figures, demand gap is estimated to be over $500m annually.
Construction of dams and irrigation infrastructure development and rehabilitation to increase cropping hectarage and productivity.
Where are the opportunities in Nigeria?Key Sector/ Industry Opportunities
Under-exploited sector despite large mineral base – bitumen, coal, limestone, etc
Solid minerals development now a Government priority with new investor friendly minerals extraction policy
Commercial deposits of bitumen - 2nd largest bitumen deposit in the world estimated at 42 billion metric tons
Exploration and Mechanized Coal/Lignite Production (reserves estimated at 15 billion barrels
Mining of highly viable Barytes and Bentonite for the Oil Industry and Gypsum for the Cement Industry
Exploration and Development of Phosphate Resources for the Fertilizer Industry
Commercial exploitation of Bitumen in Nigeria – estimated to be a $2billion/ annum industry (based on imports)
OPPORTUNITIESSECTOR OVERVIEWAGRICULTURE
SOLID MINERALS
19
Nigeria is currently ranked 5th in Africa by tourist arrivals
The country has 5 National parks & several tourism destinations with suboptimal development
Presence of a few of international hotel brands, all of which are 100% booked all year round
Development of world class hotels (international brands) with multiple star ratings particularly in Abuja, the Nations capital
Establishment of resorts near waterfalls, springs etc Beach Tourism potentials in boating and sport fishing facilities
offers attractive investment Heritage/Cultural Tourism Resources Development of slave trade
relics Wildlife Tourism – development of game parks with accompanying
tourist lodges
Where are the opportunities in Nigeria?Key Sector/ Industry Opportunities
Heavy strain on existing infrastructure –80% of existing infrastructure capacity in enjoyed by 15% of the population
Significant physical infrastructure gap –transport, power etc (requires $100bn over the next 6 yrs)
Government has undertaken significant reforms to encourage private sector participation
PPP of Major Highways on Design, Build, Maintain, Operate and Transfer (DBMOT) of major economical viable routes
Privatization/ Concessioning of electricity generation & distribution companies
Completion of NIPP Projects: Transmission, Generation, Distribution & Gas Pipelines estimated at $3billion
Right of Way Concession and new track Construction on BOT basis for rail development
Greenfield port development and port infrastructure expansion and renewal
OPPORTUNITIESSECTOR OVERVIEW
TOURISM & HOSPITALITY
INFRASTRUCTURE
20
9th largest producer of oil and the 7th largest gas reservoir in the world
Government is going ahead with extensive reforms of the sector to improve private sector participation
Government plans to achieve Oil Reserves of 40 billion Barrels & a production capacity of 4.5 mbpd by 2010
Restructuring of the National Oil Corporation (NNPC) leading to privatisation of viable subsidiaries
Implementation of the Nation’s gas masterplan offers investment opportunities in Central Processing Facilities as well as pipeline infrastructure for LNG, GTL, feedstock for IPPs, etc.
Joint venture with marginal field operators – 24 licenses have been granted but only 3 are operational as others require funding and management improvements
An injection of an estimated $100billion required over the next 5 years
Where are the opportunities in Nigeria?Key Sector/ Industry Opportunities
Largest non-oil growth sector over the last 7 years
Industry is worth several billion of dollars attracting significant FDI in last 6 years
Large market – only 60m lines in operation within a population of 140m
4 GSM operators – Recording Average Annual Revenues of $1.5billion/ year
Ample opportunities for additional operators in both GSM and Fixed Wireless telephony
Manufacture of GSM and Fixed Wireless telephones (currently not been produced in the country)
Local manufacture of inputs and other transmission equipment –over 80% of inputs are currently imported
Development of facilities to implement co-location and infrastructure consolidation
OPPORTUNITIESSECTOR OVERVIEW
OIL & GAS
TELECOMMUNICATIONS
21
Nigeria is a promising country for investment, and it becomes even more promising if you know that a lot of other people are going to be
investing there as well
“This historic agreement consolidates Dubai World’s strategy of tapping new business sectors, leveraging the expertise of the group’s various companies to make sound, strategic, long-term investments
in the field of energy and natural resources. Nigeria is a land of considerable opportunity and it is entirely appropriate that Dubai
World will partner with the Government of Nigeria to help harness this enormous potential over time”
Sultan Ahmed bin SulayemChairman, Dubai World
Nigeria:Infrastructure – FG Signs $16 Billion Investment Pact With Dubai World (UAE)
“We are tasked with building a diversified portfolio of investments in companies and assets related to natural resources located in
developing markets. It is extremely exciting that we will be involved directly in the oil and gas aspects of this landmark cooperation
agreement. DNRW looks forwards with excitement to contributing to the Nigerian growth story”
Abdul Wahid Al UlamaVice Chairman, Dubai World
Dubai World Chairman, His Excellency Sultan Ahmed bin Sulayem (right), shakes hands with the Attorney General of the Federal Republic of Nigeria and Minister of Justice, Hon. Chief Michael Kaase Aondoakaa (SAN), during the
signing ceremony in Abuja.
ABOUT BGL
23
Corporate Finance Public Sector Advisory Structured Finance Principal Investments Investment Research
Equity Trading Fixed Income Trading Propriety Trading Strategic Acquisitions and Advisory
Private Wealth Management Fund Management and Advisory Specialty Asset Management and Advisory Institutional Asset Management and
Advisory
Private Equity Funds Real Estate Investments Long-term/ Strategic Investments Business Incubation/ Investment Monitoring
Plc
Securities Limited
Asset Management
Private Equity
About BGL
We are one of Africa’s leading Investment Banking,Securities Trading, Private Equity, Asset Managementand Private Wealth Management Groups. Head-quartered in Lagos-Nigeria, we provide world classservice and products to clients that includeGovernment, Corporations, Financial Institutions andHigh Net Worth Individuals.
From our inception in 1993, we have expanded ourInvestment Banking business to become one ofNigeria’s most successful Financial Institutions andemerged a very influential member of the NigerianStock Exchange.
We have participated in several landmark transactionsand won industry awards across all our businessareas. We are respected for our strong fundamentalresearch and product innovation; our ability to executeInvestment Banking Mandates; our Securities TradingPlatform and our unrivalled distribution capabilities.
With Shareholders Funds in excess of N47bn (USD300MM) and a presence in 28 locations with over 250staff throughout Nigeria, BGL is uniquely positioned toprovide an unrivalled Investment Banking andInvestment Management service.
24
About BGLKey Contacts
HEAD OFFICE ABUJA OFFICE PORT HARCOURT OFFICE
Millennium House12A Catholic Mission Street,Lagos IslandLagos
Plot 417 Tigris CrescentOff Aguiyi Ironsi StreetOpp. FCT High CourtMaitama, Abuja
59B King Perekule StreetGRA Phase II,Port HarcourtRivers State
Tel: 01-2645224; 4622602-3URL: www.bglltd.com
Tel: 09-7817731; 7817729 Tel: 084-462359; 576552; 240009
NAME DESIGNATION CONTACT DETAILS
Albert Okumagba Group Managing Director, BGL Plc [email protected]
Chibundu Edozie Group Executive Director, BGL Plc [email protected]
Babajide O. Ewuoso Divisional Head, Public Sector Advisory [email protected]
Mahesh Pagarani Head, International Strategy [email protected]
BGL Contact Details
Key Contact Persons
25
Thank You