Here is NSE’s 2010 Outlook. You can download the document here.

Outlook for 2010
There are positive prospects for the Nigerian economy for 2010. The World Bank and IMF believe that the global economy would emerge from recession to record positive growth rates in 2010. Specifically, IMF said it expected the world economy to grow by 3.1%, while the Nigerian economy is expected to grow by 5%. The Economist anticipates a GDP growth rate of 5.2% in 2010 while the Federal government targets 6.1%. By OPEC estimates, global crude oil demand in 2010 would reach 85.13mbd, increasing by 0.82mbd or 0.98% compared to 2009. Demand for OPEC crude oil is expected to be 28.61mbd in 2010, up from 28.58mbd in 2009 attributed to the expected global economic recovery. US-based Energy Information Administration (EIA) forecast that increased crude oil prices and output would boost OPEC member countries income by $184 billion (about N27.6 trillion) in 2010, after tumbling nearly 1/3 in 2009. OPEC countries were projected to net about $575 billion in 2009 – far below its record 2008 income of $965 billion.

NNPC disclosed that barring any serious disruptions in the oil industry, Nigeria’s crude oil production level is expected to peak at 2.506mbd in the 2010, 20% higher than the 2.088mbd on which revenue projections for the year were based. The optimism is based on the successful completion of the first phase of the amnesty programme. NNPC foresees an upsurge in oil production activities as the various oil firms seize the opportunity to execute major repairs on their facilities hitherto vandalized, as well as to re-enter previous no-go areas.

Commodity prices were surprisingly buoyant in 2009, and are expected to increase further in 2010 as world activity expands after the global crisis. But rising demand will require extra capacity in many commodity sectors. However, the ability to impact on the economy depends on the institution of policies and programmes to boost output.

Despite the optimistic views, there are fundamental challenges to be faced during the year. The expected growth rate in 2010 would be defined by the economy‘s ability to sustain the amnesty programme in the Niger Delta, the provision of basic infrastructure, management of inflationary risks from fuel price deregulation, and the prevention of labour unrest. We are confident the current uncertainty in the political environment would settle soon and refrain from impacting the economy and stock market negatively.

Sustained recovery now requires effective reform of financial markets. As only a more ethical and responsible financial sector can properly serve the needs of the economy. Effective regulation is in the interest of financial institutions. One step in this direction has been the issue of the adoption of International Financial Reporting Standards (IFRS) which the Nigerian Stock Exchange proposes to adopt this year. Another crucial factor for a sustained recovery is the role of the proposed Asset Management Company (AMC). The proposed Asset Management Company (AMC) offers the Nigerian financial markets the opportunity of a life time to strengthen our infrastructure and put us in a better position to deal with contingencies as experienced by the market in 2008/2009.

The regulatory authorities have met to decide on a proposed structure and the President has sent the bill to the National Assembly. It is important that the bill is passed as soon as possible in order that the AMC can come into existence and remove a large chunk of the non-performing loans from the books of the banks thereby freeing up credit that can be used to drive economic growth. The concept of the AMC must be got right and if for want of time far-reaching corrections cannot be made in the bill, the guidelines for the operation of the AMC must be formulated to take care of the important details not covered by the bill when it eventually becomes an Act.

The Nigerian Stock Exchange commends the Federal Government for sustaining the issuance of bonds through the Debt Management Office (DMO), however, for the purpose of transparency and pricing efficiency, The Exchange should make the request that the DMO consider migrating trading on the OTC to The Nigerian Stock Exchange trading platform, which has the technology to deliver on transparency and efficiency. It is significant that, contrary to local argument that bonds are better traded OTC, last year the London Stock Exchange launched a new retail bond market for the UK. Also, the market would be order-driven, as against the contention in certain quarters here that a liquid bond market must be quote-driven.

Furthermore, since the original intention in the organization of the government bond market was to replicate the bond market of South Africa, in spite of advice to the contrary, the acquisition of Bond Exchange of South Africa by the JSE Securities Exchange should cause the DMO and SEC to review the extant strategy for reactivating the Nigerian bond market.

The issue of bond trading and investing has taken on more importance recently as a result of the problems suffered in Dubai. As a result of the near default by DubaiWorld, bond investors worldwide are starting to review their exposure to sovereign and quasi-sovereign debt in order to avoid any potential default or liquidation issues. Along with our recent classification by the USA, Nigeria may likely experience a lesser participation by international investors in its bond market going forward. This makes it even more important to open this segment to the retail investors, especially at a time when we anticipate several Sovereign, State and Corporate bond issues coming to the market in the near future. This is another reason we hope DMO will review its decision about migrating trading from the OTC to the Exchange platform.

Over time, The Exchange has brought to the fore, challenges militating against stock market development in Nigeria. These challenges include the incidence of multiple tax regimes on businesses and investors, and the slow pace in the implementation of the privatization programme, especially those earmarked to be consummated through the stock market. The Exchange urges the National Assembly to expedite action on all bills on Tax, Oil and Gas reforms, Privatization, and Capital Market reforms currently before it. The Exchange appeals to government to review the tax structure holistically, with a view to streamlining the tax system and remove incidence of multiplicity of taxes by the three tiers of government

The Primary Market promises to be busy during 2010 as many banks and corporate entities consider recapitalizing through combinations of bond and equity issues. The Exchange awaits execution of the decision, by the Bureau of Public Enterprises (BPE), for the National Council of Privatization to sell government‘s interests in six public corporations on the Exchange. These corporations are Transcorp Hilton Hotel, NNPC, NITEL, Nigerian Reinsurance Corporation, NICON Insurance and Nigerian Security, Printing and Minting Corporation.

The Secondary Market also promises to be busy with many companies that executed Private Placements in 2008 take advantage of the window of opportunity offered by the recently-created AIM/PRIPEX, to list their shares. Through public awareness programmes, The Exchange plans to sensitize the investing public on the various opportunities available in the stock market.
The Exchange will continuously work to support government and its agencies towards the realization of Nigeria‘s economic development and growth objectives, working closely with the Federal Ministry of Finance, CBN, SEC and other members of the Financial Sector Regulation Coordinating Committee (FSRCC), while maintaining relationships with operators in the international arena, with a view to facilitating the flow of international investment capital to Nigeria. In taking such pro-active measures, the intent is to enhance the quality of the overall market.