Nigeria’s Record Stock Rally Fails to Lure Foreign Investors

LAGOS (Capital Markets in Africa) — Nigeria’s equity rally is yet to catch the attention of foreign investors wounded by failed attempts to repatriate gains made on earlier investments.

The stock market rose 50% last year driven by pension funds avoiding negative real yields in fixed-income debts after they were locked out of buying high-yielding central bank papers. Offshore investors largely stayed out of the market after the central bank failed to supply enough dollars to enable them to repatriate gains made from buying short-term instruments. This was after the plunge in oil prices led to a shortfall in the greenback in Africa’s largest economy.

Foreign inflows into stocks dropped 43.1% within the period compared to 2019, data from the Nigerian Stock Exchange shows.

“I didn’t get any phone call from any international investor asking me why am I missing the rally in Nigeria?,” Akinbamidele Akintola, an equity analyst at Stanbic IBTC Stockbrokers, said at a conference on Tuesday. “I don’t expect to see any material inflows” or anything significant coming into equity “for now until there is clarity on the ability to take dollars out of the country.”

A lot of big frontiers and emerging market funds currently have no holdings in Nigeria, Akintola said.

“Unless oil prices go to $100 or $150 per barrel, it’s very hard to see what would trigger foreign investors to come back to have trust in Nigeria’s forex regime,” Charles Robertson, chief economist at Renaissance Capital, said at the same conference.

Stocks in Lagos rose 0.4% at the close on Tuesday. The market may gain as much as 20% this year as pension fund administrators push some of their liquidity into equities, Akintola said. Only 5% of pension funds are invested in stocks as of September, according to data on the regulator’s website.

Source: Bloomberg Business News