Nigeria’s stocks have been rated among the world’s best-performers
in the past four months.
Bloomberg reported on Monday that the good performance was as a
result of foreign investors.
The New York-based financial software, data, and media company,
said net foreign inflows to Nigerian equities totalled 337 billion naira ($940
million) last year, the first time flows have been positive since at least
2013.
It said December 2017 was the best month since Bloomberg started
compiling data at the beginning of 2014, with net inflows of 140 billion naira,
signaling a switch in sentiment toward equities in Africa’s biggest oil
producer.
The finance media company said foreign investors were heavy buyers
of Nigerian shares last year.
“Nigerian equities have gained in allure for international
traders, thanks to the rise in Brent crude prices to around 70 dollars a barrel
and an easing of dollar shortages, which are helping Africa’s largest economy
recover from its worst slump in 25 years.
“They’re also attracted by what remain among the cheapest
valuations on the continent.
“The turnaround has seen investors pile into the New York-based
Global X MSCI Nigeria ETF this year, too.
“That’s increased the exchange-traded fund’s market capitalisation
to almost $100 million, triple the size of a year ago,” Bloomberg said.
The world-beating rally in Nigerian stocks might not be over yet,
noting that the main equity index in Africa’s biggest economy had surged 12 per
cent in the first two weeks this year in dollar terms, the most among 96 major
bourses tracked by Bloomberg, pushing it to the highest level since 2008.
It said the advance would probably be sustained thanks to rising
prices for oil, Nigeria’s main export, and as investors look to increase their
holdings of what remained among the cheapest stocks in Africa.
“Still, there are some warning signs. The 120-day correlation
between Nigerian stocks and Brent crude is now around the highest in two years.
If oil prices reverse their 45 per cent climb since June, Nigerian assets could
take a hit.
“That’s one reason HSBC Holdings Plc has a negative outlook on the
stocks. The U.K. bank also says Nigeria will have to free its currency further.
“While the central bank eased some capital controls last year and
opened a trading window for foreign portfolio investors, it continues to
operate several exchange rates.”
It warned, however, that Nigeria’s multiple exchange rate system
was likely to remain a key drag, keeping long-term investors on the side lines.
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