Listen now Getting your Trinity Audio player ready... |
Leading global asset managers are giving a thumbs up to market reforms initiated by Nigerian President Bola Tinubu, who just completed 1-year in office.
More importantly, they are investing again in the capital markets of Africa’s most populous nation, after years of capital controls and unsustainable foreign exchange regime, under the leadership of the previous central bank Governor, Godwin Emefiele.
Chris Tennant, a fund manager at Fidelity International, one of the world’s largest investment companies, says this “ambitious reform agenda is showing early signs of success”, and the outlook for the country is improving.
Nigeria has been dogged by a severe lack of foreign exchange that has hamstrung international investors.
As oil prices tumbled at the start of the Covid-19 pandemic, Nigeria’s central bank introduced foreign exchange controls, in a move to alleviate a dollar shortage.
This made it very hard for foreign investors in Nigerian stocks to get their money out of the country when they sold up.
President Bola Tinubu gave investors hope when he took office last summer. He promised them he had “listened” and would ensure they would be able to repatriate their “hard-earned dividends and profits home” in his inauguration speech.
Nigerian stocks are the worst performers among major African economies in the past decade.
Over the past 10 years to the end of April 2024, the Kenyan market has fallen 12 per cent, the Nigerian market has fallen 89 per cent. This compares to the Kenyan market down 12 per cent, the Egyptian market down 46 per cent, and the South African index returning just 7 per cent.
Gregory Longe, portfolio manager of the Africa Frontiers Strategy at Cape Town-based Coronation Fund Managers, says “both Nigeria and Egypt have emerged as more appealing” after their respective central banks this year allowed their currencies to weaken significantly against the US dollar.
Longe adds: “More importantly, access to US dollars in both markets has improved. While still early days, this is a dramatic improvement for two markets plagued by dollar shortages since 2020.”
Mark Mobius, chair of the Mobius emerging opportunities fund, has become far more optimistic about Africa’s investment prospects, generally.
He says the most attractive countries right now are “South Africa, Egypt, Morocco, Nigeria and Kenya . . . Although the political situation and economic conditions in these countries are not necessarily ideal, that does not mean individual companies can’t do well.”
The veteran investor believes the most interesting sectors are broadcasting, retail, mining, and banks.
Companies with the “highest earnings growth and low debt” are the most compelling, he says.
Mobius warns that investors must work harder in Africa to uncover investment gems. But, scratch beneath the surface, he says, “and there are opportunities everywhere.”
Follow the MoneyCentral Nigeria channel on WhatsApp: Click here!