Nigerian equities and country-specific exchange traded fund surged Wednesday, extending recent gains to a new high as investors jumped back into the market in anticipation of strong earnings growth after the economy broke out from its recession.
The Global X Nigeria Index ETF (NYSArca: NGE) was up 5.3% Wednesday.
Investors were focusing on consumer goods and banking shares ahead of strong earnings and a possibility of dividend payments after Nigeria pulled away from a recession in the second quarter, Reuters reports.
The financial and consumer staples segments are the two largest sector weights in NGE’s portfolio, making up 51.4% and 36.4%, respectively, of the ETF’s underlying holdings.
NGE has increased 27.1% year-to-date, recovering from losses earlier in the year after the central bank in April lifted currency controls for foreign investors.
A financial expert with FXTM, Lukman Otunuga, argued a lot has changed for the better since February 2017 due to the positive moves of the Central Bank of Nigeria, reports Michael Ogwu for All Africa.
“The CBN implementation of the NAFEX window has improved liquidity even though a full solution has not been found,” Otunuga told All Africa. “What I have found is that the government has learnt its lesson from the 2017 budget and the 2018 budget estimates have come in more realistic with oil price at $45 and the exchange rate at N305. What I am a bit worried about is that in the third quarter of 2017, our oil production was at two million barrels. We will see OPEC ask Nigeria to cut production from the current level to 1.8 million barrels. If that happens, we will be 500,000 barrels down, and that will have an impact.”
Nigeria previously suffered through a downgrade from ratings agency Standard & Poor’s and the central bank’s decision to abandon its currency peg. The actions may be traced back to the extended weakness in oil market, which the country relies on with its heavy exports. However, the stabilizing oil prices are beginning to help support the economy.
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