#1September 2018 Strictly Private and Confidential UNITY AND FAITH, PEACE AND PROGRESS Federal Republic of Nigeria Investor Presentation#2Disclaimer THIS PRESENTATION IS NOT AN OFFER OR SOLICITATION OF AN OFFER TO BUY OR SELL ANY SECURITIES. This presentation has been prepared by the Federal Republic of Nigeria (the "Republic") solely for information purposes. No representation or warranty express or implied is made as to, and no reliance should be placed on, the fairness, accuracy, completeness or correctness of the information or any opinion contained herein. The information contained in this presentation should be considered in the context of the circumstances prevailing at the time and will not be updated to reflect material developments that may occur after the date of the presentation. 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All or any part of this presentation may not be reproduced, copied, redistributed, retransmitted or disclosed in any manner or form and for any purpose whatsoever. By attending this presentation, you are agreeing to be bound by the foregoing limitations.#31 Representatives of the Federal Government of Nigeria Sen. Udoma Udo Udoma Hon. Minister of Budget and National Planning Dr. Okechukwu Enelamah Hon. Minister of Industry, Trade and Investment Mrs. Zainab S. Ahmed Hon. Minister of Finance Mr. Godwin Emefiele Governor of the Central Bank of Nigeria#42 Table of Contents 01 02 03 04 05 Т Nigeria in Context ERGP: Implementation of Key Reform Initiatives and Associated Results Improving Business Environment Fiscal Performance, Reforms & Debt Management Monetary and Banking Updates#5UNITY AND FAITH, PEACE AND PROGRESS 1. Nigeria in Context Senator Udoma Udo Udoma, Hon. Minister of Budget and National Planning#6Federal Republic of Nigeria Snapshot Land Area 923,768 sq. km Capital Abuja Population Estimate (m, 2017) 190.8 Population Growth Rate (2016) 2.6% Nominal GDP (US$ billions, 2017) 371.9 OGNI Per Capita (US$, 2016) 2,450 UNITY AND FAITH, PEACE AND PROGRESS B/B+/B2 Recent Milestones National Economic Recovery and Growth Plan (ERGP) launched Sovereign Credit Ratings (S&P/Fitch/Moody's) Currency Average Exchange Rate (Sept 2018) System of Government Borders Nigerian Naira (NGN) USD/NGN: 306.25 Multi-party democracy with four (4) year election cycles since 1999 Benin, Chad, Cameroon and Niger World Bank Ease of Doing Business rank moves up 24 places $3bn Eurobond Issued 3.7x Oversubscribed. Nigeria/SSA Debut 30-year Bond Another N500bn approved in the 2018 Budget for Social Investment Programmes Mar 2017 2016 Oct 2017 Nov 2017 Apr 2017 June 2018 Sep 2017 Feb 2018 Jul 2018 Strong implementation of fiscal reforms (TSA, IPPIS, PICA, Expanding Tax Net, etc.) & Strategic Implementation Plan for 2016 Budget Investors & Exporters (I&E) FX window opened N100 bn debut Sovereign Sukuk issued to finance the construction of 25 critical priority roads of Economic importance $2.5bn Eurobond Issue 4.5x Oversubscribed Abuja Light Rail Commissioned. One of many capital projects completed in 2018 Sources: Central Bank of Nigeria: Data & Statistics, World Bank, IMF. 3 Nigeria in Context#7Key Investment Highlights Africa's largest economy has continued to improve and is poised to sustain higher and better quality growth. Strong Governance and Transparency Focus (Anti-Corruption Drive) Robust Debt Dynamics and Developed Domestic Fixed Income Market Strong Public Finance Management Reforms 4 Nigeria in Context Mature Political System Improving Ease of Doing Business Well-Regulated Banking Sector Enhancing Security Increasingly Diversified Economy Oil and Gas Powerhouse Focus on Infrastructure, ICT Transformation Promoting Macroeconomic and Price Stability#8Comprehensive Plan to Support Recovery and Growth The Government has consolidated its economic initiatives into a single comprehensive and robust plan - Recovery and Growth Plan (ERGP). - ERGP Focuses on Five Strategic Areas Macroeconomic Policy • Focus on macroeconomic stability ⚫ Liberalize exchange rate • Ensure fiscal sustainability • Increase efficiency • Improve revenue collection • • Economic Diversification and Growth Drivers Move towards self-sufficiency in food production Made in Nigeria campaign & Special Economic Zones • Investment promotion Initiatives ERGP Focus Labs Competitiveness • Investing in infrastructure • Improving the Nigerian business environment • Promoting digital-led growth Single-digit (9.9%) inflation Restore & increase crude output to 2.5mbpd Undeterred Focus on 2020 Goals Average GDP growth I of 4.6% Reduce unemployment to 11.2% . • the Economic Social Inclusion and Jobs Increase social inclusion Job creation and youth empowerment Human capital development • Governance and Other Enablers Win the Peace • Respect of property rights . Adherence of transparency and accountability rules for government spending and procurement I Average annual | agriculture growth of 6.9% Sources: Budget Office of the Federation, Ministry of Budget and National Planning. ERGP, National Bureau of Statistics, ERGP, CBN, World Bank. 5 Nigeria in Context Attain 10GW of | operational energy capacity Average annual manufacturing growth of 8.5%#9Commitment to ERGP is Yielding Results ERGP Supporting a Return to Growth ... % Change YoY 5.5 6.2 2.8 With an Increasing Share Driven by Non-oil % of GDP 88.8 89.6 90.4 91.7 91.3 91.4 1.5 0.8 (1.6) 2013 2014 2015 2016 ■Non-oil Oil 2017 1H2018 2015 2016 2017 1H2018 2013 2014 Significant Progress on Inflation % 18.6 18.7 17.8 17.2 16.3 16.1 16.0 15.9 15.4 15.1 14.3 14.0 13.3 13.0 12.0 11.0 Stabilisation Continues with Reserves Recovering Foreign Exchange Reserves*, US$ Bn 50.0 45.0 14.0 40.0 12.4 35.0 12.5 11.6 30.0 11.2 11.1 11.2) 25.0 44.9 Dec-16 Feb-17 Apr-17 Jun-17 Aug-17 Oct-17 Inflation Dec-17 Feb-18 Apr-18 Jun-18 Aug-18 - 2018 ERGP target 20.0 Jan-12 Sep-12 May-13 Jan-14 Sep-14 May-15 Jan-16 Sep-16 May-17 Jan-18 Sep-18 MPR FX Market Trends Show Stability and Convergence Between the Interbank Rate (NIFEX) and NAFEX over the Past 12 Months USD/NGN 400 380 360 340 320 300 03/01/17 17/04/17 NGN Spot 30/07/17 NAFX Index 11/11/17 23/02/18 07/06/18 20/09/18 ⚫NIFX Index 6m NDF Sources: Bloomberg, CBN. *August and September 2018 foreign reserves are 30 day moving averages as of 31 August and 20 September 2018, respectively CO 6 Nigeria in Context#10Fundamentals Support Resilience to Global Headwinds Since 2015 sound fiscal and monetary policies have left Nigeria in a good position to handle external shocks. Sustainable External Debt Levels... External Debt/Current Account Receipts, 2018F (%) 51.6 112 Nigeria B/B2/B+ Angola B-/B3/B Egypt B/B3/B 137.2 144.2 Current Account Surplus... Current Account Balance, % of GDP 3.7% 2013 2014 0.2% South Africa BB/Baa3/BB+ Sources: CBN, National Bureau of Statistics, Moody's Statistical Handbook May 2018 *Sept. 2018 foreign reserves are 30 day moving average as of 20 Sept. 2018 7 Nigeria in Context Kazakhstan BBB-/Baa3/BBB 249.4 235.1 Brazil BB-/Ba2/BB- 146.6 112.7 B1 -B3 Median Ba1 - Ba3 Median 5,000 2.8% 4,000 0.7% (3.2%) 1,000 2015 2016 2017 3,000 2,000 ...Strengthening Reserves in a Challenging Environment Foreign Exchange Reserves, US$ bn 42.8 34.2 28.3 27.0 44.9 39.4 2013 2014 2015 2016 2017 YTD2018* ...Built on Strong Export Growth Foreign Trade, N Tr 0 -1,000 Q2'16 Q3'16 Q4'16 Q1'17 Q2'17 Trade Balance (RHS) Q3'17 Q4'17 Q1'18 Exports --Imports Q2'18 0 3,000 2,000 1,000#11UNITY AND FAITH, PEACE AND PROGRESS 2. ERGP: Implementation of Key Reform Initiatives and Associated Results Senator Udoma Udo Udoma, Hon. Minister of Budget and National Planning#12Continued Investment in ERGP Implementation CapEx Nearly Doubled in Nominal Size and Share of Budget... NBn, % of Total Expenditure 9,120 ERGP commitment to allocate at least 30% of annual budget to capital expenditure to stimulate & support the economy, with focus on growth, job creation, and infrastructure 7,441 32% 6,060 32% 4,493 16% 30% 2015 2016 2017 2018 ■Non-CAPEX □ CAPEX Greater spending on education and health at the Sub-national level (States and Local Governments), TETFUND and UBEC. ...With Increased Allocations to Priority Sectors # Bn 800 700 600 500 400 300 200 100 0 Power, Works & Transport Housing Agriculture Defence Interior (including Education (not Police) including UBEC) Health ■2015 2016 2017 2018 • ERGP Focus Labs Mobilizing private investments to grow the economy • Aim to unlock US$ 22.5 billion of private investments by 2020 across various sectors of the economy: - Agriculture: US$ 1.2 billion - Transportation: US$ 3.5 billion Manufacturing: US$ 5.9 billion - Solid Minerals: US$ 3.3 billion Gas: US$ 2.0 billion Power: US$ 6.5 billion Target creation of 514k jobs by 2020 • US$ 10.9 billion of the investment categorized as 'most ready' to go • Several quick wins/early successes recorded • Cumulative investments from first phase of Labs could reach US$ 39.2 billion by 2025 ⚫ Ministerial Delivery Units set up in the six Ministries (Agriculture, Transport, Industry, Trade and Investment, Power, Works and Housing, Petroleum Resources, and Mines and Steel Development) to work closely with MBNP in the implementation of the Lab outcomes Source: Budget Office of the Federation, Ministry of Budget and National Planning; 8 Reform Implementation and Key Initiatives#13Oil and Agriculture Update Oil Significant increase in average YTD production Av. MBPD, as of Sept 2018 2.1 1.8 118 1.9 1.9 1.8 2015 2016 2017 1H2017 1H2018 2.15 I YTD2018 I T Agriculture Continued focus and investment in agriculture despite recent headwinds Agriculture Sectors as % of GDP 30 25 25 20 15 10 5- 0 2013 2014 2015 Agriculture total 2016 2017 1H2018 Crops - Livestock Sources: NNPC, National Bureau of Statistics, Ministry of Budget and National Planning. 9 Reform Implementation and Key Initiatives I . I I Average year to date production is lower than budgeted production level due to aging oil production infrastructure ¦ • Renewed emphasis on investment in production, refining and distribution capacity, as well as security, support goal of reaching 2.5mbpd by 2020 • Key legislation to attract investments to the Oil Sector being reviewed | I I | I I Over N55 billion so far disbursed to 250,000 farmers under the Anchor Borrower's scheme • Introduced a Presidential Fertilizer Initiative ('PFI') resulting in the revitalization of 14 fertilizer blending plants, with a total installed capacity in excess of 2 million metric tonnes per annum, thereby supporting many farmers nationwide. Nigeria's milled rice production increased from 2.5MT to about 4MT between 2015 and 2017 • Government is in the process of privatising 20 out of the 23 Strategic Grains Reserve Silos in the country, promoting effective management to ensure food security I I I I I I I I I I#142018 Budget Key Initiatives Key initiatives remain the core focus of budget planning and resource allocation. • Strategic Investments to Fund Future Growth The 2018 Budget demonstrates the Government's strong commitment to investment in infrastructure development About #2.37 trillion (US$7.8 billion), to be invested in critical infrastructure projects Some of the allocations to Key Initiatives are: T Transportation Power Sector Bank of Industry and Bank of Agriculture Agricultural and Rural Development N162.3 billion is budgeted for funding railway projects, N8.3 billion for the construction of second runway at Abuja airport and #530.8 million for construction of the terminal building at Enugu airport It is intended that #14.2 billion will be invested in the Fast Power Programme Accelerated Gas and Solar Power Generation, #9.4 billion for construction of the 3,050MW Mambilla hydropower project and 9.7 billion for earmarked transmission lines and substations. #193.3 billion will be put towards the Power Sector Recovery Programme N15 billion is provisioned to development finance institutions to support Micro, Small and Medium, Scale Enterprises #4.2 billion has been budgeted for the Rural Roads and Water Sanitation programme, in addition to over #25.1 billion for the promotion and development of value chain across different commodities and N4.0.8 billion towards food and strategic reserves Crucial Social Investments Housing Healthcare Defence Education Sources: Budget Office of the Federation, Ministry of Budget and National Planning. 10 Reform Implementation and Key Initiatives #26.7 billion is provisioned for the National Housing Programme and #3.9 billion for a mass housing project in Abuja N8.9 billion is intended to be invested in the procurement of routine vaccines and devices in addition to #3.0 billion towards a Global Fund and GAVI counterpart funding and N1.2 billion towards the Polio Eradication Initiative. In addition, there is a provision of N55.15 billion for the Implementation of the National Health Act #4.4 billion will be invested in new military barracks in Abuja and five geopolitical zones and #5.3 billion will be used to procure ammunition, investing in improving security throughout the country N109 billion to the Universal Basic Education Commission and 9.2 billion in scholarship allowances#15Developing the Power Sector - Implementation Update Expanding power sector infrastructure is one of the top priorities of the ERGP. The objective is to achieve 10GW of operational capacity by 2020 and to improve the energy mix through greater use of renewable energy. The Power Sector Recovery Programme (PSRP) details the policy actions, operational, governance and financial interventions to be implemented by the Government over the next 5 years to restore the financial viability of the power sector. The PRSP has the following objectives: Restore the sector's financial viability Improve power supply reliability to meet growing demand Strengthen the sector's institutional framework and increase transparency Implement clear policies that promote and encourage investor confidence in the sector Establish a contract-based electricity market (eligible customer regulation) Generation Improved from 4,000 MW (approx.) in 2015 to 7,000 MW (approx.) in 2018, although 5,000 MW is distributed • Plans underway to add up to 950 MW from Azura (455 MW), Kaduna (215 MW), Afam III (240 MW) and Kashimbilla (40 MW) while about 1,180 MW is projected for 2019 from Zungeru (700 MW) and Okpai II (480 MW) Transmission Improved from 5,000 MW to 7, 124 MW in 2018 (approx.) About 90 transmission projects in various stages of construction Distribution Improved from 2690 MW to 5,222 MW in 2018 (approx.) • As 40% owner, Government is developing an arrangement to support the DISCOS by investing in the procurement of equipment and installations to help distribute the stranded 2000 MW of production Eligible customer arrangement is being promoted to enable customers who consume 2MW or more to contract directly to take power from GENCO Government, acting through the Rural Electrification Agency, is linking small power entrepreneurs with markets like Ariaria in Aba, Sabon Gari in Kano, and Sura Market in Lagos 11 Reform Implementation and Key Initiatives#16Promoting Social Inclusion The Federal Government of Nigeria allocated #500 billion to take care of the poor and vulnerable under four clusters. Govt. Enterprise & Empowerment Programme (GEEP) GEEP represents 308,737 loans successfully disbursed ....to 4,084 cooperatives across 36 states +FCT Conditional Cash Transfer ⚫ 297,973 supported with cash transfers of #5,000 in 217 LGAs across 20 states • 2,530 community facilitators trained Home Grown School Feeding Programme • 8.56 million school children fed ...in 46,000 schools across 24 states • Catering Staff engaged: 90,670 T N-Power Programme First batch: 200,000 deployed in October 2016. ⚫ Second Batch: 308,389 deployed in August 2018. 12 Reform Implementation and Key Initiatives#17UNITY AND FAITH, PEACE AND PROGRESS 3. Improving Business Environment Dr. Okechukwu Enelamah, Hon. Minister of Industry, Trade and Investment#18A More Conducive Atmosphere for Business Economic Diversification and Growth Drivers Move towards self-sufficiency in food production Made in Nigeria campaign & Special Economic Zones Investment promotion Initiatives ERGP Focus Labs Competitiveness Investing in infrastructure Improving the Nigerian business environment Promoting digital-led growth Strong Growth in Business Confidence... PMI 58.0 ...With Increasing Ease of Doing Business EDB Rank, 1 Being the Best Performing Improvement of 24 places in 1 year 41.0 170 170 169 3 Jul Oct Jan Apr Jul '14 '14 '15 '15 '15 Oct Jan Apr Jul Oct Jan Apr July Oct Jan Apr July '15 '16 '16 '16 '16 '17 '17 '17 '17 '18 '18 '18 13 Nigeria in Context Manufacturing PMI Non-Manufacturing PMI 145 2014 2015 2016 2017#19Key Initiatives to Improve the Business Environment Presidential Enabling Business Environment Council (PEBEC) Special Economic Zones • Completion of 60-Day National Action Plan on Ease of Doing Business including the Visa-on-arrival policy and issuance of Executive Order E01 on Ease of Doing Business • Aim to establish in every geo-political zone • Contract recently approved by FEC • Industrial infrastructure being set up in each SEZ • Aim is to expand production of goods in Nigeria and create jobs (supporting our Made-in-Nigeria campaign) • N44.2 billion allocated for SEZs in the 2018 Budget ⚫ Launched first edition of compendium on investment incentives in Nigeria Investment Promotion Initiatives • Launched Online Investors' Guide in May 2018 and creation of Database of Investment Opportunities Country Focus Investment Promotion Strategy is being implemented by NIPC NIPCAC Initiatives in the Mining Sector Initiatives in the Transport Sector Initiatives in the Power Sector • • National Committee on Export Promotion is implementing a plan to enhance export promotion and economic diversification in line with the Zero Oil Plan (ZOP) · Nigeria Industrial Policy and Competitiveness Advisory Council establishment as a vehicle for partnering with the private sector on the Industrialization Agenda • The Council has identified 49 initiatives to be implemented over 12 to 18 months Engaging with the NEC to address 8 issues identified as key impediments to investment and business operations Reinforcing the Mining Regulatory Agency (by N644 million in the 2018 Budget) • National Gold Purchase Scheme underway and CBN advancing discussions on modalities for gold purchase towards enhancing liquidity in the sector • Modern standard track railway being developed: Lagos-Kano, Calabar- Lagos, Abuja-Itakpe-Aladja Concessioning of existing narrow gauge rail lines: Lagos-Kano and Port-Harcourt - Maiduguri . • Abuja light rail - first phase commissioned by President Buhari in July 2018 .2015 to 2018 progress: Generation improved from 4,000 MW to 7,000 MW Transmission improved from 5,000 MW to 7,124 MW Distribution improved from 2,690 MW to 5,222 MW • Continued focus on increasing generation, transmission, and distribution capacity through various projects Sources: Ministry of Finance, Ministry of Budget and National Planning, Ministry of Industry, Trade and Investment. 14 Improving Business Environment#20Nigeria's Strategic Initiatives on Trade Nigeria's Trade Policy Trade Remedy Mechanism (TRM) The present administration approved the establishment of Nigerian Office for Trade Negotiations (NOTN) to coordinate various trade agreements and negotiations as well as assist in achieving coherence in trade policies. In view of its mandate, in Sept 2018 Nigeria called for nation-wide inputs for a "21st Century Trade Policy for Nigeria - A welfare and Prosperity Agenda for that Works for All" • Establishing a Trade Remedy Mechanism (TRM) in accordance with mandate of the NOTN and the African Continental Free Trade Agreement (AfCFTA) consultations and sensitization exercise. A TRM has been approved by the Economic Management Team and is embedded in the Executive Order and awaiting President Buhari's approval African Continental Free Trade Agreement Implementation of the WTO Trade Facilitation Agreement Nigerian Industrial Revolution Plan (NIRP) Trade Incentives • • • . • • • Signing of the Agreement establishing the African Continental Free Trade Area (AfCFTA) was completed in March 2018 and a consultation exercise was completed for stakeholders in the 6-geopolitical zones of Nigeria This has led to the emergence of a well-structured consultative mechanism with stakeholders, establishment of a Technical Working Group (TWG) on goods market access and Nigerian Coalition of Services Industry (working on Nigeria/ECOWAS services schedule) In 2017, Nigeria ratified the WTO Trade Facilitation Agreement (TFA). Nigeria believes that the implementation of the WTO TFA will reduce trade cost, improve competitiveness and integrate Nigeria into global value chains In October 2017, Nigeria launched the "National Trade Facilitation Road map: 2018-2022", providing guidance and direction to trade facilitation across the country as well as boost the Ease of Doing Business (EODB) in Nigeria In 2014, Nigeria launched a comprehensive Industrial Revolution Plan (NIRP) to accelerate investments in strategic sectors of the economy and increase industry sector contribution to GDP, create employment, increase domestic production and assist in enhancing areas Nigeria has comparative advantage The Plan is being implemented through Private Public Partnerships (PPP) to build sectors with specific value chains and action has been accelerated on Nigeria's SEZs Pioneer Status has now been reformed and applications can now be processed Export Expansion Grant - approved by the FEC and now boosting non-oil exports • Sector Specific Interventions in tomato, starch, sugar, textile, leather and garments Source: Ministry of Finance, Ministry of Budget and National Planning, Ministry of Industry, Trade and Investment. 15 Improving Business Environment#21Investment Incentives and Reforms in Nigeria Compendium of Investment Incentives Investor Protections in the NIPC Act COMPENDIUM OF INVESTMENT INCENTIVES IN NIGERIA NIGERIAN INVESTMENT PROMOTION COMMISSION AND FEDERAL INLAND REVENUE SERVICE FIRS FIRST EDITION 31 OCTOBER 2017 Compilation of fiscal incentives in Nigerian tax laws and duly approved sector-specific incentives First step in understanding impact of incentives in achieving Government's economic objectives and considering incentive reforms Ownership Nigerians and foreigners can invest in any sector, except for those on the negative list No restriction on foreign percentage ownership 6 principal sections ▷ Investment policies and protections ▷ General tax-based incentives Guarantees ■ Government will not nationalize or expropriate any enterprise Right of access to courts and fair and adequate compensation if acquisition is in national interest/for public purpose No restriction on repatriation by foreigners of investment returns or sale proceeds through an authorized dealer ▷ Sector-specific incentives ▷ Tariff-based incentives ▷ Export incentives ▷ Special Economic Zones Dispute Resolution ■ Amicable resolution by mutual discussion or arbitration of investor/government disputes Provisions of any Bilateral Treaty with the investor's country will apply Right of recourse to international arbitration under ICSID* Rules Source: Ministry of Industry, Trade and Investment. *ICSID International Centre for Settlement of Investment Disputes 16 Improving Business Environment#22UNITY AND FAITH, PEACE AND PROGRESS 4. Fiscal Performance, Reforms and Debt Management Mrs. Zainab S. Ahmed, Hon. Minister of Finance#23Fiscal Discipline and Ongoing Initiatives to Improve Revenues Prudent Fiscal Policy Holds Budget Deficit Below 3% of GDP Budget Deficit as % of GDP 2013 2014 -0.99 -1.32 2015 2016 2017 2018E Efficiencies -1.62 -1.92 Reforms Supporting Increased Revenue Generation NBn, % of GDP 14.3% 13.8% 63.2 67.2 69.0 9.0 9.3 -1.73 -2.41 -3.00 8.8% 7.8% 10.5% 6.1 67.9 5.3 68.5 7.2 2013 2014 GDP 2015 Revenue (Oil+ Non-Oil) 2016 2017 Revenue GDP Sources: Ministry of Finance, Budget Office of the Federation, Ministry of Budget and National Planning. 17 Fiscal Performance, Reforms and Debt Management Treasury Single Account implementation • Integrated Payroll Personnel System (IPPIS) implemented across MDAs to enhance efficiency and eliminate unjustified payroll entries Financial Sustainability Improving Non-Oil Revenues Improving Tax Revenues • Establishment of Efficiency Unit to cut costs and block leakages Adoption of a 22-point Fiscal Sustainability Plan with the States as one of the measures to tackle the 2015- 2016 fiscal crisis at the sub-national level following the decline in revenue • Presidential Initiative on Continuous Audit . Tighter performance management framework for SOES Improving Value Added Tax (VAT) collection - 85% allocated to state and local governments Introduction of a Policy on Tax on select luxury items • Increase in Excise Taxes on alcohol and tobacco • Reforms of pioneer tax incentive regimes • Broaden tax base and improve revenues (Federal and State Governments) • Resulted in the number of taxpayers rising from 13 million to 19 million . Time-limited opportunity for tax payers to regularise tax status (VAIDS)#24Nigeria's Debt Management Strategy Reduce debt service ratio by increasing revenue Lengthen the maturity profile of government debt 18 Fiscal Performance, Reforms and Debt Management UNITY AND FAITH PEACE AND PROGRESS Ensure sustainable public debt and borrowing on a prudent and least cost basis Rebalance debt portfolio in favour of lower cost longer tenured debt#25. . . • • Government Debt Remains Low and Maturities Extending Prudent Maintenance of Debt at Sustainable Levels... General Government Debt / GDP (%) ...And One of the Lowest Debt Levels among African Peers 2018F General Government Debt/ GDP (%) 13.2 12.4 12.5 18.9 18.7 16.9 2013 2014 2015 2016 2017 Jun-2018 22 19.1 22 Nigeria B/B2/B+ Kazakhstan BBB-/Baa3/BBB South Africa BB/Baa3/BB+ 75.7 72.8 55.5 Angola B-/B3/B Brazil BB-/Ba2/BB- Debts are serviced as and when due and there are no defaults Debt Sustainability Analysis conducted annually to reaffirm that Public Debt Stock is sustainable US$500 million Eurobond redeemed in July 2018 #836.93 Billion Nigerian Treasury Bills redeemed between December 2017 and June 2018 Reduction in domestic borrowing rates: from 18.5% in January 2017 to between 10 - 14% for FGN Bonds and NTBs in 2018 New Initiatives in Debt Management Diversification of borrowing instruments: Sukuk, Green Bonds and Diaspora Bonds • Closer co-ordination with monetary authorities Sources: Moody's Statistical Handbook May 2018, Debt Management Office. 19 Fiscal Performance, Reforms and Debt Management 91.5 60 47.2#26Achieving an Optimal Debt Balance Debt Servicing Costs have Increased and are Being Managed Down Interest Cost / Revenue % External Debt Is Primarily Concessional Borrowing % of Total External Debt, 1H2018 11.1 9.6 15.6 28.1 29.7 21.0 ıllı 49% O 11% 40% 46% O 54% 2013 2014 2015 2016 2017 2018F ■ Multilateral ■Commercial ■ Bilateral On Track to Shift Domestic Debt Portfolio to Long Term Maturities % of Total Domestic Federal Government Debt ■ Non-concessional ■Concessional Rebalancing to Optimal External/Domestic Debt Mix % of Total Federal Government Debt 57.3% 60% 63.7% 68.6% 70.4% 71.6% 75.7% 75% 73.4% 69.8% 86.3% 85.7% 83.6% 80.1% 42.7% 40% 36.3% 31.4% 29.6% 28.4% 24.3% 25% 26.6% 30.2% 13.7% 14.3% 16.4% 19.9% 2013 2014 2015 2016 ■ Short term 2017 ■Long term 1H2018 2019 Target 2013 2014 2015 2016 2017 1H2018 2019 Target ■External Debt Domestic Debt Sources: Moody's Statistical Handbook May 2018, Debt Management Office, Debt Management Strategy. 20 Fiscal Performance, Reforms and Debt Management#27UNITY AND FAITH, PEACE AND PROGRESS 5. Monetary and Banking Updates Mr. Godwin Emefiele, Governor of the Central Bank of Nigeria#28Broad-based Monetary Policy Measures Bolstering Economic Recovery Monetary Policy • Monetary Policy Rate (MPR) kept steady at 14%, cash reserves requirement (CRR) and liquidity ratio (LR) retained at 22.5% and 30%, respectively • Given Nigeria's strong trade relationship with China, in April 2018 the CBN signed a $2.5 Bilateral Currency Swap Agreement (BCSA) with the People's Bank of China (PBOC) to promote trade between the two countries Achieving stable and sustainable non-inflationary growth remains one of the primary objectives. Inflation moderated to 11.23% in August 2018 Developments in the Foreign Exchange Market • Measures taken to boost market liquidity and ease demand pressure; Introduction of the Investors and Exporters (I&E) FX Window, which has increased market transparency and helped in stabilizing the NGN/USD exchange rate • Transactions at the I&E window stood at close to $22bn in 2017, with the increased inflow of USD helping to narrow the gap between the official and parallel NGN rates Financial Sector Reforms Implemented various initiatives to sustain the safety, soundness and stability of banking institutions • Introduced the Real Sector Support Facility (RSSF) to consolidate and sustain the nation's economy Adoption of IFRS 9 by Nigerian banks effective 1 January 2018 . External Reserves Management • Rebuilt foreign exchange reserves stand at US$44.9 billion as of 20 Sept 2018, an increase of US$11.7 billion or 35.4% y-o-y • This development, largely due, to increase in oil-related revenues, TSA and third party receipts, security lending cash collateral, and Eurobond proceeds 21 Monetary and Banking Updates#29CBN: Focused and Forward-looking Monetary Policy Significant Progress on Inflation % Stabilisation Continues with Reserves Recovering Foreign Exchange Reserves*, US$ Bn 20.0 18.0 18.6 18.7 17.8 16.0 50.0 17.2 45.0 16.3 16.1 16.0 15.9 15.4 15.1 14.3 14.0 40.0 13,3 12.5 12.4 35.0 14.0 14.0 13.0 12.0 12.0 11.0 10.0- 8.0 11.6 30.0 11.2 11.1 11.2 25.0 44.9 6.0 20.0 Dec-16 Feb-17 Apr-17 Jun-17 Aug-17 Oct-17 Dec-17 Feb-18 Apr-18 Jun-18 Aug-18 Jan-12 Sep-12 May-13 Jan-14 Sep-14. May-15 Jan-16 Sep-16 May-17 Jan-18 Sep-18 Inflation 2018 ERGP target MPR FX Market Trends Show Stability and Convergence Between the Interbank Rate (NIFEX) and NAFEX over the Past 12 Months USD/NGN 400 390 380 370 360 350 340 330 320 310 300 03/01/17 17/04/17 NGN Spot 30/07/17 NAFX Index 11/11/17 23/02/18 07/06/18 20/09/18 NIFX Index 6m NDF Sources: Bloomberg, CBN. *August and September 2018 foreign reserves are 30 day moving averages as of 31 August and 20 September 2018, respectively 22 Monetary and Banking Updates#30Reforms Support Stability and Growth in the Banking Sector Bank Lending is Recovering, Boosting Lending to the Real Economy... # Tr ...With Banks Maintaining Loans/Deposit Ratios Below Parameters Average Loan/Deposit Ratio (%) +56.4% 80 80 69.6 72.8 14.75 63.6 14.98 12.19 12.26 9.54 20.4 14.9 15.5 16.1 17.1 36.3 2013 2014 2015 2016 2017 2013 2014 2015 2016 2017 ■Other Assets ■Loans and Advances Banking Sector Overview and Recent Developments • There are 27 banks operating in Nigeria, a figure that has remained fairly stable since a 2004 wave of consolidation reduced the number from 89 to 25 - Total assets of deposit money banks increased by 43.6 per cent. from N24.5 trillion in 2013 to #35.1 trillion in 2017, attributed to the increases in reserves, aggregated credit and loans and advances • Several measures have been undertaken to contain risks to financial stability and strengthen banking sector resilience, including increased provisioning, strict limits on net FX positions, and prohibition of dividend payments by banks with low Capital Adequacy Ratio. ⚫ On 21 Sept. 2018, the Bank revoked the license of Skye Bank to ensure stability in light of urgent need of recapitalization • The Bank deployed the Credit Assessment Analysis System, intensified the monitoring of the implementation of Basel II/III standards and continued to subject domestic systemically-important banks to enhanced regulation to strengthen its supervisory and surveillance activities. • The Central Bank has also been taking steps to integrate global best practices in financial reporting and disclosure with the implementation of IFRS 9. The Bank undertook an impact assessment of banks' total provisions and capital showed that capital adequacy was moderated by the huge regulatory risk reserve balances of the banks Source: CBN. 23 Monetary and Banking Updates#3124 Supervision and Regulation of Banks - Sanctions Update On August 30th 2018, four commercial banks were sanctioned by the Central Bank of Nigeria (CBN) for illegal capital repatriation, on behalf of MTN Nigeria. Background • The sanctions on the banks arose due to irregularities with respect to repatriations made on behalf of some offshore investors of MTN Nigeria Communications Limited Laws and regulations • The banks were fined for violation of extant laws and regulations of the Federal Republic of Nigeria, including the Foreign Exchange (Monitoring and Miscellaneous Provisions) Act, 1995, and the Foreign Exchange Manual, 2006 Current • The Banks and MTN are engaging with the CBN and have provided additional information which is currently being reviewed with a view to arriving at an equitable solution 即 Nigeria will continue to welcome foreign investments and all investors Monetary and Banking Updates OIII Nigeria Remains' Open No retroactive application of foreign exchange rules and regulations O Enormous investment opportunities still in Nigeria#32UNITY AND FAITH, PEACE AND PROGRESS Thank You