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Buying Nigeria


Power surge. The 25% spurt in the NSE All Share Index over the last month has been a welcome surprise. By comparison, the FTSE100 and S&P500, which most of us are invested in one way or another, are up by less than 2% over the same period.

Why the surge? It's really all about the improving economic outlook. Yes, the economy is still in a recession but the recent indicators suggest that Nigeria will be growing again in the second half of the year and equities have responded accordingly. The upswing has been largely driven by a pickup in both oil prices and output, the turnaround in inflation, the ongoing easing of FX restrictions and support from government spending. News that President Buhari has responded well to his recent bout of medical treatment in London has also helped to support confidence and dampen fears of political uncertainty.

Will it last? Of course. no one knows. But the economic backdrop and technical indicators that we use at Afrinomica suggests that there is plenty of upside momentum left. The key downside risks revolve around three factors:

(i) a rollback of FX availability and a premature tightening of monetary policy - both of these mean that we are keeping a close eye on the central bank whose next policy announcement is scheduled for July 25;

(ii) a downside move in oil prices, say to below $42/bbl-currently Brent Crude is on a softening phase and trading at around $48, or more output disruptions;

(iii) The health of President Buhari taking a serious turn for the worse.

How can I get involved? One route is via a local a local Nigerian dealer such as ARM Securities or Meristem. The process is fairly time-consuming and a little laborious. A much easier and cheaper route would be to opt for an exchange trade fund, which broadly tracks the main Nigerian index - often ETFs can be easily tracked and managed from your smartphone. The key player in the market is the Global X MSCI Nigeria ETF, In a nutshell, this is a fairly low-cost and efficient way of adding some of Nigeria’s largest and most profitable companies to your portfolio. If you are interested then send an e-mail to info@afrinomica.com and we will provide you in with all the details.

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