Investing Goals: Nigeria

WORLD CUP 2018 INVESTMENT SERIES: In the fourth of our eight-part series, we feature our Group D favourite - Nigeria

Emma Wall 19 June, 2018 | 1:05PM
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This article is part of our World Cup 2018 Investment Series, one top market pick from each of the eight Groups – but instead of comparing sporting prowess we outline the best investment prospect.

Nigeria frontier market emerging economy growth education

Nigeria’s World Cup 2018 campaign did not get off the best start. Their opening game against Croatia on Saturday ended in a 2-0 defeat as the 20th ranked team dominated at Kaliningrad Stadium. Nigeria is ranked 48th in the world – with current odds around 500/1 that the team lifts the trophy next month. But its investment prospects are considerably more attractive.

While Argentina may be the Group D favourites to move forward in Russia, we’ve picked Nigeria as the star of our investment series.

According to the World Bank, Nigeria’s economy grew at an average rat of 5.7% a year from 2006 to 2016; dominated and driven by the oil price, growth peaked at 8% and troughed at -1.5% during this decade.

While the overdependence on commodities is not ideal, demographics are incredibly supportive in this African nation, having one of the youngest populations in the world. The government has committed to structural reforms too, their Economic Recovery and Growth Plan 2017–2020 embraces renewable energy, tackles climate change and aims to halt land degradation and desertification.

It is not without its challenges – current President Muhammadu Buhari has been outspoken against corruption, raising the level of employment and diversifying the economy. He also faces the challenge of defeating militant group Boko Haram.

But there is a thriving entrepreneurial spirit – which has spawned successful start-ups, in particular in the tech space. Software outsourcing firm Andela, even attracted a $24 million investment from Facebook founder Mark Zuckerberg. Another success story is Flutterwave, a digital payment firm which has recently partnered with Boston-based Flywire to tackle cross-border payments. Flutterwave raised $10 million in investment last year.

How to Invest

While the economy drivers of Nigeria are increasingly diverse, and the demographics are supportive, the stock market can be volatile. Single market exposure is not advised in frontier markets. Instead, a regional fund – investing across the Middle East and Africa, or a frontier markets fund – investing across the 29 frontier markets are a better bet.

The five top performing Middle East and Africa funds are BPI Global Investment Fund, JP Morgan Africa Equity, Russell - Old Mutual African Frontiers, Sanlam African Frontier Markets and T. Rowe Price Middle East & Africa Equity. Of these, the fund with the largest weighting to Nigeria is the Old Mutual fund, with 16%, followed by JP Morgan Africa with 13%.

A frontier markets fund with broader geographical exposure, but with a sizable weighting to the World Cup pretender is the four-star performance rated East Capital Global Frontier Markets fund. While it is not the best performing frontier markets fund on the market, it is the one with the largest allocation to Nigeria at 9%.

The information contained within is for educational and informational purposes ONLY. It is not intended nor should it be considered an invitation or inducement to buy or sell a security or securities noted within nor should it be viewed as a communication intended to persuade or incite you to buy or sell security or securities noted within. Any commentary provided is the opinion of the author and should not be considered a personalised recommendation. The information contained within should not be a person's sole basis for making an investment decision. Please contact your financial professional before making an investment decision.

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Securities Mentioned in Article

Security NamePriceChange (%)Morningstar
Rating
BPI GIF Africa I10.93 EUR-0.60Rating
JPM Africa Equity A perf (acc) USD9.96 USD-2.13Rating
Old Mutual African Frontiers B Hybrid12.64 USD-1.15Rating
T. Rowe Price Mid East & Afr Eq I USD17.43 USD0.37Rating

About Author

Emma Wall  is former Senior International Editor for Morningstar