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Nigeria Sinks Below Zimbabwe Stock Valuations
Nigeria’s Islamist insurgency, tumbling oil revenue and a looming presidential election have turned the nation’s stocks into Africa’s biggest laggards, according to Bloomberg.
The country’s main equity index lost 25 percent this quarter after tumbling to a 22-month low, the continent’s largest retreat.
The Nigerian measure dropped to 8.1 times estimated earnings Dec. 11 in Lagos, falling below Zimbabwe for the first time since Bloomberg started tracking the southern African nation in 2010.
Bloomberg reported that tension in Africa’s largest economy is escalating before polls in February pitting southern Christian President Goodluck Jonathan against former military ruler Muhammadu Buhari, a northern Muslim, with attacks by the Islamist militant group Boko Haram killing at least 450 people in November.
Crude’s plunge below $65 a barrel has deepened the rout as Nigeria needs a price of $126 to balance its budget, more than any other major developing-nation producer bar Venezuela and Bahrain, according to Deutsche Bank AG.
“The government situation is somewhat chaotic,” Mark Mobius, who oversees about $40 billion as the executive chairman of Templeton Emerging Markets Group, said by phone from Bangkok on Dec. 9.
“You’re going to get a lot of hesitation on the part of investors” until after the polls, he said.
The Nigerian Stock Exchange All Share Index decreased 3.5 percent to 31,062.03, the lowest level since January 2013. The gauge has dropped 28 percent from this year’s high in July.
It is the fourth-biggest fall among 93 stock gauges tracked by Bloomberg worldwide this quarter through Dec. 11.
The last time Nigeria held general elections in 2011, stocks declined 1 percent in the six months before the April poll to end the year 16 percent down.
Jonathan’s victory triggered riots across the north that killed more than 800 people and led to the burning of churches, mosques and homes and was challenged by the runner-up.
Investors are more concerned this year as increased attacks by Boko Haram “make these elections particularly fraught,”
Nnamdi Obasi, a senior analyst for West Africa at Brussels-based International Crisis Group, a conflict resolution organization, said in a report last month.
Consumer and energy shares have been among the biggest drags on the benchmark index. Dangote Cement Plc, controlled by the continent’s richest man, Aliko Dangote, has dropped 28 percent this year.
The stock makes up about a quarter of the gauge’s $62 billion market capitalization. FBN Holdings Plc, owner of the country’s biggest lender, fell 47 percent amid higher capital requirements.
The estimated price-to-earnings ratio for Nigeria is the lowest of nine of the largest markets in sub-Saharan Africa and compares with 8.14 times for the main measure of the stock exchange in Zimbabwe, where a decade-long recession that began in 2000 reduced the size of the economy by half.
Kenya’s Nairobi All Share Index is valued at 11.4, while Russia’s Micex Index is at 4.6 times estimated earnings as the economy teeters on recession amid international sanctions against the world’s biggest energy exporter. Brazil’s Ibovespa Index is valued at 10.3, while the MSCI Frontier Markets Index measures 9.1.
The selloff in some consumer stocks and banks has been extreme even after accounting for a more difficult business environment amid lower oil prices, Joseph Rohm, who helps manage about $2 billion in Africa for Investec Asset Management, said by phone from Cape Town Dec. 10. “It’s a better environment now for stock-pickers with a long-term horizon.”
Nigerian securities will rebound in 2015 if the political environment improves, Mobius said. The $1.8 billion Templeton Frontier Markets Fund hasn’t reduced its exposure to Nigeria during the recent downturn, he said.
The latest data from Nigeria’s stock exchange show foreign investors have been net sellers of the nation’s shares and bonds on the whole. They pulled $273 million from the country in October, the most since February when central bank Governor Lamido Sanusi was suspended.
Oliver Bell, a money manager at T. Rowe Price Group Inc. in London, said last month that the firm’s Africa and Middle East fund has cut holdings of Nigerian shares to the lowest level since the fund’s inception in 2007, even as he predicts the country’s long-term investment case will stay intact.
“We’re not seeing this as a buying opportunity at all,” David Wickham, director of frontier and emerging-market equity at HSBC Global Asset Management, which has $850 million in frontier market shares, said by phone from London Dec. 10.
“It’s a pretty challenging period. Most investors, unless they’re extremely contrarian, will sit back and wait.”
While Jonathan will probably win the elections, he is weakened by Boko Haram’s Islamist attacks along with his administration’s failure to curtail corruption and by senior party member defections to the opposition, Sebastian Spio- Garbrah, managing director at New York-based consultancy DaMina Advisors LLP, said last month.
Nigeria’s economy, which relies on oil for more than 90 percent of exports and 70 percent of government revenue, is getting buffeted by Brent crude’s more than 40 percent plunge since June to the lowest level in more than five years.
The finance ministry, which had projected 6.35 percent economic growth in 2015, may reduce that forecast by about one percentage point next week, spokesman Paul Nwabuikwu said by phone Dec. 10 from the capital, Abuja.
The central bank raised interest rates to a record 13 percent last month in a bid to stem capital outflows and defend the local currency, which dropped to a record low against the dollar on Dec. 2 and is heading for its biggest annual decline since 2008. The naira weakened 0.3 percent to 181.82 per dollar as of 9:50 a.m. in Lagos, extending losses this quarter to 9.9 percent.
“In the next 30 years, it’s a fantastic place to be,” said HSBC’s Wickham. “Right now, it’s a different story.”
Commercial banks in Nigeria closed 2.021 million bank accounts in the first quarter of 2024, Q1’24, to clean their books of questionable accounts and comply with regulatory orders on the linkage of bank accounts to the National Identity Number (NIN).
This is contained in a report by the Nigerian Interbank Settlement System (NIBSS), which also indicated that the number of inactive bank accounts grew month-on-month, MoM, by four million or 2.0 per cent to 19.7 million in March 2024 from 19.3 million in the previous month, February.
A bank account is classified inactive when it records zero transactions including deposits, withdrawals, transfers or point-of-sale transactions for six months.
However, details of the “Industry Bank Account Database”, a monthly data reported by banks, and compiled by the Nigerian Interbank Settlement System, NIBSS, also indicated that the number of active bank accounts grew by 6.62 million or 3.0 per cent to 219.64 million from 213.02 million in February.
Recall that in December 2023, the CBN issued a directive to all commercial banks in the country to restrict tier-1 accounts without proper Biometric Verification Number (BVN), and National Identity Number, NIN, that are not linked by Thursday, March 1st, 2024.
According to NIBSS data on BVN enrollment count, 61.6 million Nigerians have BVN as of April 2024.
Credit: Vanguard
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Dubai-Based Citizenship Firm Imperial Citizenship Expands to Lagos, Targets Africa’s Growing Wealth
Imperial Citizenship, a Dubai-based firm specialising in Citizenship and Residency by Investment (CRBI) solutions, has set its sights on Africa’s burgeoning wealth with the launch of a new office in Lagos, Nigeria.
This strategic move positions Imperial Citizenship to capitalise on the continent’s growing population of high net worth individuals (HNWIs) seeking international investment and mobility options.
Imperial Citizenship boasts a proven track record of success, having secured over 2,000 approvals for clients seeking alternative citizenship and residency pathways. Their partnerships with over 15 governments worldwide provide a diverse portfolio of investment opportunities that adhere to strict international regulations.
With its Lagos launch, Imperial Citizenship begins its foray into Africa. The continent boasts a burgeoning HNWI population, according to PwC, presenting a lucrative market for investment firms like Imperial Citizenship.
According to the World Bank, African economies are projected to grow by 3.4 % in 2024 as the African Development Bank Africa has reported that Africa will account for eleven of the world’s 20 fastest-growing economies in 2024. Highlighting the market’s potential, Mr. Zaid Al Hindi, Founder and CEO of Imperial Citizenship, says, “our expansion into Lagos allows us to directly cater to this affluent segment, offering them strategic solutions for global asset diversification, optimised investment opportunities, and enhanced global mobility.”
“At Imperial Citizenship, we do not operate through intermediaries, as we differentiate ourselves through direct government partnerships. This ensures transparency, legality, and efficiency throughout the application process, providing peace of mind for investment-minded clients” Zaid stated during the launch event in Lagos.
Speaking on the company’s approach to CRBI, Zaid mentioned, “At Imperial Citizenship, we prioritise a client-centric approach. We go beyond simply offering programs; we provide dedicated advisors who understand the unique needs and aspirations of each client. This personalised service ensures clients receive tailored investment options that align with their financial goals and risk tolerance”.
The launch of the Lagos office underscores Imperial Citizenship’s commitment to global expansion. With physical offices in Dubai and now Nigeria as well as operational representatives in Mexico, Algeria, and Turkey, Imperial Citizenship demonstrates its ability to cater to a geographically diverse clientele.
Looking ahead, Zaid highlighted that Imperial Citizenship plans to broaden its service offerings and expand its reach into new markets. By strategically targeting Africa’s rising wealth, Imperial Citizenship is well-positioned to solidify its role as a leading player in the CRBI industry, offering investors a gateway to global opportunities.
In a recent gathering, organized by 234Finance, key stakeholders and HNIs came together to discuss the theme “Fueling Progress in the South East.”
The conversation highlighted the rich heritage, entrepreneurial spirit, opportunities for growth and the potential of the South East to be economic powerhouse.
During the discussion, the Managing Partner of 234Finance, Ezinne Nwazulu unveiled plans for an upcoming event of significant impact: the 4-week intensive SME Bootcamp and Mentor Matchup Challenge South East edition designed to empower SMEs. The program aims to empower SMEs with the knowledge, tools, and capital for rapid expansion and global competitiveness.
This initiative is building on the success of previous Mentor Matchup Challenge events, which equipped SMEs with actionable strategies and one-on-one mentorship, resulting in winners of the pitching competition securing grant funding to scale their businesses by 4x-10x.
The SME Bootcamp will feature an array of activities, including physical and virtual training sessions, onsite industrial training, and a pitching competition.
Ezinne Nwazulu emphasized the rigorous selection process, where the top 100 applicants meeting the criteria will undergo intensive training at two training centres in Abia and Anambra. From there, the most promising 15 participants will have the opportunity to pitch their business for grant funding.
Dr Chima Anyaso, Chairman of Caades Group, expressed his commitment to the region’s development and encouraged entrepreneurs with innovative crafts to seize this opportunity.
Criteria for selection are uncompromising, emphasizing technical expertise in core sectors; Agribusiness, Manufacturing, Supply Chain & Logistics, Fashion & Textile, and Retail, with a particular focus on businesses operating within the South-East region for at least three years and significant growth potential of 4x-10x.
The Bootcamp is set to commence from May 14 to June 14 2024 with Southeast-based entrepreneurs encouraged to visit the 234finance bootcamp to apply.
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