AMBASSADOR VISITS NIGERIAN STOCK EXCHANGE

UNCLAS LAGOS 002374 SIPDIS SENSITIVE BUT UNCLASSIFIED E.O. 12958:N/A TAGS: EFIN ECON EINV NI SUBJECT: AMBASSADOR VISITS NIGERIAN STOCK EXCHANGE ¶1. (U) Ambassador John Campbell visited the Nigerian Stock Exchange (NSE) in late October. The program included remarks by NSE management, the Ambassador's ringing of the closing bell, brief question and answers with the press, lunch with NSE management and traders, and interaction with principal stock traders. ¶2. (U) The NSE is one of Africa's leading securities exchanges with one of the best rates of return on investment in the world, according to NSE Director General Dr. Ndi Onyiuke. The market has risen approximately 40 percent in annualized terms over the last four years. The all-share index has grown from 100 in 1984 to an all-time high of 26,000 in 2004. It is at just over 22,000 at present. ¶3. (U) Industry watchers predict further growth over the next few years, given the introduction of new derivative instruments, pension reform, and the reactivation of the corporate and government bond market in Nigeria. The NSE has a relatively strong regulatory capacity within the Nigerian context and is a signatory to the World Federation of Exchanges international code on money laundering. The exchange sponsors several international investment road shows to the United States and Europe each year in an effort to attract investment from the Nigerian diaspora and from international fund managers. The NSE reports Americans hold USD 300 million worth of shares on the exchange. ¶4. (U) Dr. Ndi Onyiuke stressed the importance of integrity and transparency in the NSE's activities. The NSE has rigorous standards to prevent and detect fraud, she asserted during her conversation with Ambassador Campbell. The public's trust in the exchange has been central to its success. Ndi Onyiuke acknowledged that corruption and fraud are problems in Nigeria. However, she maintained that only a small number of individuals committed these criminal activities, which unfortunately give the entire country a black eye. Ndi Onyiuke hopes the NSE will serve as an exemplar of how businesses and government institutions can operate in Nigeria. -------------- Comment -------------- ¶5. (SBU) Ambassador and Consulate Staff visited the NSE the day after Transparency International (TI) released its Corruption Perceptions Index 2004, ranking Nigeria as the third most corrupt country in the world, a marginal improvement over 2003 when Nigeria was ranked number two. The ranking appeared to weigh heavily on Ndi Onyiuke who went to great lengths in her discussion with the Ambassador to differentiate the NSE from corrupt individuals and institutions in Nigeria. Most reports we hear about the exchange are favorable and indicate that Ndi Onyiuke and her predecessors have been largely successful insulating the exchange from large-scale fraud and unscrupulous business practices. Clearly, however, the NSE is handicapped by the global image of Nigeria as a country long on corruption and short on transparency. The NSE stands as one of the few in Nigeria that plays by the rules of the market. In doing so and doing so successfully, it demonstrates to Nigeria that fair practice and profit are not antagonists. This is a lesson Nigeria needs and we should encourage and support the NSE to the extent possible. CAMPBELL