For those wondering why the Global X Nigeria Index ETF (NYSEArca: NGE) turned a decent performance Monday on volume that was nearly five times the daily average, the answer is simple.
Over the weekend, in a move expected for some time, Nigeria’s National Bureau of Statistics changed the base year for calculating the country’s GDP to 2010 from 1990. By the stroke of a pen and some paper-pushing, OPEC member Nigeria has now surpassed South Africa as Africa’s largest economy.
For investors looking to gain exposure to Africa’s largest oil producer, NGE is the pure play option and the country’s weight in the iShares MSCI Frontier 100 ETF (NYSEArca: FM) will grow next month when Qatar and the United Arab Emirates depart for the MSCI Emerging Markets Index. [Use These ETFs for Qatar, UAE Exposure]
But how Nigeria’s move to the top of African economies affects the Market Vectors Africa Index ETF (NYSEArca: AFK) is a scenario of indexing aficionados to watch. AFK tracks the Market Vectors GDP Africa Index (MVAFKTR), which as its name implies, is a GDP-weighted index. As of March 31, Nigeria was AFK’s third-largest country weight at 16.7% behind South Africa (20.5%) and Egypt (19%), according to Market Vectors data.
So is Nigeria guaranteed the top spot in AFK when the ETF rebalances in June? The simple answer is maybe, but maybe not.
Nigeria’s weight in the index may not be directly proportional to its GDP. Even before the rebase, Nigeria’s economy was larger than Egypt’s, but Egypt is AFK’s second-largest country weight. [A GDP-Weighted Africa ETF]