NEX RUBICA GROUPNEX RUBICA GROUP Now is the timeNow is the time

1st Annual Conference onAffordable Homes for All, 1st to2nd Dec 2008. Abuja, Nigeria

Mortgage Finance and localMortgage Finance and localcurrency bond markets incurrency bond markets inNigeriaNigeria –– a Nex Rubica Viewa Nex Rubica View

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Presentation summary• Summary figures on Nigeria’s mortgage market• Nigerian banking system and future funding• Simple SWOT analysis• Wholesale market strengths

– Risks and returns

• Wholesale market weakness– International risk and return

• Wholesale market opportunities– Trends

• Wholesale market threats– Trends

• Wholesale market threats– Nigerian Bank Spreads need to fall

• Generic policy conclusions• Bank specific conclusions• Appendix

–Wholesale market conditions: Annualised 90 day GBP Libor 2002- 2005–Wholesale market conditions: Monthly 90 day GBP Libor 2002- 2005–Wholesale market conditions: Daily 90 day GBP Libor 2002- 2005–Wholesale market conditions: Annualised 90 day NGN Libor 2002- 2005–Wholesale market conditions: Monthly 90 day NGN Libor 2002- 2005–Wholesale market conditions: Daily 90 day NGN Libor 2002- 2005

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Nigeria’s Mortgage market

• Nigeria is the most populous country in sub-Saharan Africa - circa 140 million people, growingat a rate of about 2.83% per annum (financial system strategy draft report 2020).

• It is estimated that about 64% of the population currently resides in the rural areas wheresocial amenities and infrastructure are inadequate. Exacerbating continued rural urbanmigration.

• Nigeria’s growing population coupled with the increasing rural urban drift will further serve toacerbate the size of the potential housing deficit over the short to medium term andaddressing the housing need of Nigeria will require huge financial resources ranging in thetens of trillion naira.

• The US – Nigeria Development Institute puts available housing stock in Urban Nigeria at 10.7munits, out of which it is estimated that less than 5% is in the formal mortgage system.

• Internal research by World bank project teams estimate the annual housing need of thecountry at between 500,000 – 1,000,000 units when the existing shortfall is met, at the rate ofurbanization. All these estimates point to a very large housing supply deficit in both the ruraland urban areas that need to be addressed in a structured manner to increase existinghousing stock.

• The development of a viable housing Finance Market is the answer to not only making housingaccessible to a greater percentage of the population, but also the development of the Nigerianeconomy. The challenge is how to mobilize/release the critical amount of funds required tojumpstart start the process.

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The Nigerian bank sector has strongfuture funding requirements.

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A simply S.W.O.T analysis

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Wholesale market strengths:Risks and returns

Yearly average monthly average daily average

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Wholesale market weaknesses:International risks and returns

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Yearly average monthly average daily average

Wholesale market opportunities: Trends

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Security Description Mid rate Maturity

3rd FGN BOND 2009 SERIES 11 6.8164% 28-Jul-09

3rd FGN BOND 2009 SERIES 12 7.0606% 25-Aug-09

4TH FGN BOND 2010 SERIES 1 8.0049% 26-Jan-10

4TH FGN BOND2010 SERIES 4 7.9216% 27-Apr-10

4TH FGN BOND2010 SERIES 7 7.9338% 27-Jul-10

4TH FGN BOND2010 SERIES 12 7.2990% 26-Oct-10

3rd FGN BOND 2011 SERIES 13 8.3543% 29-Sep-11

4TH FGN BOND 2012 SERIES 2 9.2437% 23-Feb-12

4TH FGN BOND2012 SERIES 5 9.2971% 25-May-12

4TH FGN BOND2012 SERIES 10 9.1766% 31-Aug-12

4TH FGN BOND2014 SERIES 3 9.4540% 30-Mar-14

4TH FGN BOND2014 SERIES 6 9.5559% 29-Jun-14

4TH FGN BOND2014 SERIES 11 9.4660% 28-Sep-14

4TH FGN BOND2010 SERIES 8 9.6327% 27-Jul-17

4TH FGN BOND2017 SERIES 9 10.3637% 31-Aug-17

Wholesale market opportunities: Trends

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Security description Mid rate Maturity

3rd FGN BOND 2009 SERIES 11 7.540% 28-Jul-09

3rd FGN BOND 2009 SERIES 12 7.461% 25-Aug-09

4TH FGN BOND 2010 SERIES 1 8.548% 26-Jan-10

4TH FGN BOND2010 SERIES 4 8.476% 27-Apr-10

4TH FGN BOND2010 SERIES 7 8.907% 27-Jul-10

4TH FGN BOND2010 SERIES 12 8.712% 26-Oct-10

4TH FGN BOND2010 SERIES 13 9.575% 30-Nov-10

4TH FGN BOND2010 SERIES 14 10.298% 14-Dec-10

5TH FGN BOND2018 SERIES 3 10.214% 25-Jul-11

3rd FGN BOND 2011 SERIES 13 8.652% 29-Sep-11

4TH FGN BOND 2012 SERIES 2 10.192% 23-Feb-12

4TH FGN BOND2012 SERIES 5 10.628% 25-May-12

4TH FGN BOND2012 SERIES 10 10.593% 31-Aug-12

5TH FGN BOND2013 SERIES 1 11.206% 25-Jan-13

4TH FGN BOND2014 SERIES 3 9.837% 30-Mar-14

4TH FGN BOND2014 SERIES 6 10.335% 29-Jun-14

4TH FGN BOND2014 SERIES 11 9.552% 28-Sep-14

4TH FGN BOND2010 SERIES 8 10.511% 27-Jul-17

4TH FGN BOND2017 SERIES 9 12.049% 31-Aug-17

5TH FGN BOND2018 SERIES 2 12.017% 30-May-18

Wholesale market threats: Trends

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Current Inflation RateYear-on-Yearchange (%)

12-MonthAverage

Change (%)

October-08 14.7 10.1September-08 13.00 9.20

August-08 12.4 8.50July-08 14.00 7.80June-08 12.00 7.00May-08 9.70 6.50April-08 8.20 6.10

March-08 7.80 5.80February-08 8.00 5.50January-08 8.60 5.50

December-07 6.60 5.40November-07 5.20 5.50

Treasury Bills DiscountRate

Latest StopRate

91-day Treasury Bill Rate (%) 8.30

182-day Treasury Bill Rate (%) 9.55364-day Treasury Bill Rate (%) 9.65OMO Rate (%) 55-day 6.49Monetary Policy Rate (%) 9.75As at 26th November 2008.Source: First Securities Discount House Ltd, Lagos.

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Nigeria Interbank Offer Rate(NIBOR Yield Curve) Nov 2008Source: Nigerian Money Markets Association website

Wholesale market threats: TrendsNigerian Banks’ wholesale spreads need to fall

Nigeria Interbank T-Bills True Yield Fixing

(NITTY Yield Curve) Nov 2008Source: Nigerian Money Markets Association website

Generic Policy Conclusions – the issues.

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There is an opportunity to learn lessons from the west's experienceand create a world class mortgage finance sector. including startinga covered bond market, the pre-emptive use of laws similar to theGlass-Steagall Act and the adoption as standard of international

bank accounting requirements that markDerivative positions to marketas stipulated in IAS 39,Financial Instruments:Recognition andMeasurement andIAS 32, Financialinstruments: Disclosureand Presentation.

Bank specific Conclusions –the size of the opportunity depends on your ambitions

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The key task for banks is to develop individualisedplans that manage risks appropriately andgenerate new returns by accessing long datedfinance at a price that can realisticallydrive the developmentof a strong nairadenominatedmortgage market.Combinationsof developmentof targetedassetmanagementpropositionsand effective useof debt capitalmarkets andstructured productscan yield strong assessto competitively pricedlong dated funds.

Wholesale market conditions:Annualised 90 day GBP Libor 2002- 2005

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Wholesale market conditions:Monthly 90 day GBP Libor 2002- 2005

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Wholesale market challenges:Daily 90 day GBP Libor 2002- 2005

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Wholesale market conditions:Annual 90 day NGN Nibor 2002- 2005

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Wholesale market conditions:Monthly 90 day NGN Nibor 2002- 2005

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Wholesale market challenges:Daily 90 day NGN Nibor 2002- 2005

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Wholesale market challenges:Daily 90 day NGN Nibor 2002- 2005

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ANY QUESTIONSANY QUESTIONS

If you would like to discuss any of the issues, we invite you to contact us::

Executive Principal Chief ExecutiveChidi OTI-OBIHARA Martin ORJI

advisory@nexrubica.com

DisclaimerDisclaimer

(B) This material is not intended as an offer or solicitation for the purchase or sale of anyfinancial instrument. Nex Rubica Advisory or its local affiliate and employees may hold aposition or act as local agent in the Nigerian debt market as discussed herein or act asadvisor to such issuer.

This report has been prepared by an entity which may have its own specific interest inrelation to the issuer, the financial instruments or the transactions which are the subjectmatter of the report. We do not make related investment advice as mentioned hereinavailable to any persons other than professional or institutional investors wishing toenage in Nigeria.

Copyright 2008 Nex Rubica. All rights reserved

(A) Estimates constitute our judgment and are subject to change without notice. Pastperformance is not indicative of future results. The investments and strategiesdiscussed here may not be suitable for all investors; if you have any doubts youshould consult your investment advisor. The investments discussed may fluctuate

in price or value.

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