Nigeria Leads Global Stock Markets in Q1 2024 with Foreign Investor Influx

• FPIs Turn Attention to Nigeria, Prompted by Favorable Market Conditions
• Rencap Africa Forecasts Surge in Foreign Investments in Nigerian Equities
• Rising Confidence: Nigeria’s Economic Reforms Attracting Foreign Investors
• Nigerian Equities at Two-Decade Low Valuations, Rencap Analysts Note

Renaissance Capital Africa, a division of the Russian investment bank, anticipates a significant influx of foreign investment into Nigerian equities, driven by the most attractive valuations in two decades.

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Analysts at Rencap Africa highlighted that equities in Nigeria have already recorded gains of 20 percent since the end of February, spurred by a strengthening naira. They expect this rally to gain further momentum.

Nigerian equities, when measured in US dollar terms, are currently at their most affordable levels in 20 years, presenting an opportune moment for investors. This trend aligns with a broader positive outlook for 2024 across Nigeria and other key frontier markets.

Despite substantial interest rate hikes by the Central Bank of Nigeria (CBN) in recent meetings, Nigerian stocks have surged by 39.65 percent since the start of the year, outperforming global markets including those of Kenya, Japan, and Zambia.

Foreign Portfolio Investors (FPIs) are increasingly turning their focus to Nigeria, attracted by the promising market conditions. Rencap Africa estimates that around US$1.5 billion has already been invested in Nigeria’s Treasury bills, with expectations of further portfolio inflows ranging from US$5-10 billion throughout 2024.

The CBN’s aggressive rate hikes, coupled with a more credible exchange rate policy, are proving irresistible to foreign investors who were previously hesitant about Nigeria’s market.

These rapid improvements in markets like Nigeria are often referred to as “unloved rallies,” as many investors overlook them during their weakest phases. Similar trends have been observed in other frontier markets like Pakistan, Kenya, and Egypt, where currency adjustments have led to improvements in current accounts and increased confidence among investors.

With monetary policies becoming more prudent across frontier markets, portfolio investors are gaining confidence in the prospects of these economies. This renewed optimism positions Nigeria and other frontier markets on a trajectory of sustainable growth and increased investor interest.