Nigerian stocks have jumped to a nine-year high as Africa’s biggest economy emerges from its worst recession in 25 years, buoyed by the high price of oil at $69 a barrel. The country’s main equity index grew 12 percent this year in dollar terms, pushing it to the highest level since 2008, according to Bloomberg News.
Investors are buying the cheapest stocks in Africa, confident that the Nigerian economy is set to recover and oil prices will stay high. “2018 is a story of return of Africa,” Funmi Akinluyi, head of frontier and Africa listed equity investments at London-based Silk Invest, told the press.
“The fact that we’ve seen oil trade to about $69 (per barrel) gives comfort that results will continue to increase. “We’ve also had information that GDP is steadily picking up, so all that has given investors reassurance that Nigeria is fine.”
After shying away from Nigeria following the 2014 oil crash, investors started taking interest in the country again last year when the central bank introduced a special trading window for foreign portfolio investors. The banking and pension sectors were the top-performing indexes of 2017, according to the Nigerian Stock Exchange in a year-end review posted on Twitter.
“The economy is not going to race away and have fantastic growth but the equity market is based on a lot of bad news and a lot of bad news is going away now,” said Paul Clark, a fund manager at Ashburton Investments. “I think the risks have reduced significantly.”
Nigeria’s GDP is set to grow by 2.1 per cent in 2018, according to the International Monetary Fund. On Tuesday, the latest data from the National Bureau of Statistics showed that annual inflation slowed for the 11th month in a row in December to 15.4 percent. The central bank has said it wants to cut its benchmark rate from 14 per cent if inflation continues to fall.