Aliko Dangote. File image: IOL.
INTERNATIONAL - The world-beating rally in Nigerian stocks may not be over yet.

The main equity index in Africa’s biggest economy has surged 12% this year in dollar terms, the most among 96 major bourses tracked, pushing it to the highest level since 2008.

Dangote Cement, controlled by Africa’s richest man, Aliko Dangote, and the largest company on the exchange, has climbed to a record high.

The advance will probably be sustained thanks to rising prices for oil, Nigeria’s main export, and as investors look to increase their holdings of what remain among the cheapest stocks in Africa, according to the asset management arm of South African lender FirstRand.

“For investors wanting more exposure to consumers in Africa and Nigeria, in particular, the outlook is good,” said Paul Clark, a money manager in Johannesburg at Ashburton Investments, which owns Nigerian stocks, including Seplat Petroleum Development.

“The banking sector is probably the most attractive, especially the tier-2 lenders.”


Foreign investors have been crucial in driving the market higher. The New York-based Global X MSCI Nigeria ETF attracted record weekly net inflows last week. That helped to increase the exchange-traded fund’s market capitalisation to almost $90million (R1.11billion), double the level in May last year.

Even after the gains, Nigerian valuations are the least expensive among the major African equity indexes. Nigerian stocks trade at a forward price-to-earnings ratio of 10.2, while South Africa’s are at 14 and the MSCI Emerging Market Index is at 13.

That suggests there’s further upside, according to Cape Town-based fund Allan Gray. While foreign investors turned negative on Nigeria following the 2014 oil crash and subsequent recession, the economy picked up last year and growth is forecast by the IMF to accelerate to 2.1percent in 2019.

“For long-term investors, Nigerian equities were a screaming bargain,” said Nick Ndiritu, co-manager of Allan Gray’s $389m Africa equity fund, which doesn’t include South Africa.