Investors looking for an emerging market (EM) opportunity for 2022 that offers potential growth may want to look at the country of Nigeria.
While emerging markets have been decimated as of late thanks to the COVID-19 pandemic, a stronger push for vaccinations is making EM assets look more valuable relative to potential growth opportunities. In the case of Nigeria, higher oil prices heading into 2022 could help fuel the country’s gross domestic product (GDP) further — Nigeria is Africa’s biggest oil producer, with oil accounting for 60% of government revenue and 90% in foreign exchange earnings, according to CNN.
“We expect that the average oil price in 2022 will exceed the budgeted benchmark of $62 per barrel, offering some fiscal headroom. This would be powered by higher energy demand driven by the recovery of economic activities globally. This trajectory is expected to impact on our foreign reserves and strengthen the capacity of the Central Bank of Nigeria (CBN) to support the foreign exchange market,” said Muda Yusuf, the immediate past director general of the Lagos Chamber of Commerce and Industry (LCCI) and a senior grade Nigerian economist.
Yusuf also noted that the economic effects of COVID-19 are also starting to wane. Emerging markets as a whole have been decimated by the pandemic, largely depending on how individual government responses are dictating their recovery.
“We expect to see less damaging response adopted by countries around the world. Therefore, both globally and domestically we are less likely to witness prolonged lockdowns. The service sector of the Nigerian economy will continue to outpace the real sector in 2022. In the third quarter of 2021, the service sector contribution to GDP was 50 percent and the growth of the sector was 8.41 percent. The reason for this was that the service sector is less vulnerable to the structural constraints bedevilling the economy, particularly the real sector of the economy. The infrastructure demand in the services sector is much less than that of the real sector of the economy,” Yusuf said.
Capture Exposure to Nigeria With This ETF
One way to get exposure to Nigeria is with a thematic exchange traded fund (ETF). One such ETF is the Global X MSCI Nigeria ETF (NGE).
NGE seeks to provide investment results that correspond generally to the price and yield performance, before fees and expenses, of the MSCI All Nigeria Select 25/50 Index. The underlying index is designed to represent the performance of the broad Nigeria equity universe, while including a minimum number of constituents.
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