27 April 2015, Lagos – Amidst concerns over sudden flattening of the bull run in the Nigerian stock market, dealers are speculating large inflows of Foreign Portfolio Investments, FPIs, on the heels of the post election market rally. World’s biggest sovereign wealth fund, SWF, Norway’s Government Pension Fund Global, GPFG, is said to be refreshing its interests in the Nigerian market after a tactical ‘hold action’ late last year.
Many dealers were working on the expected surge in the FPIs after the elections but the deals which were said to be worth over USD20 billion were not yet concluded as at last week. Last year, GPFG added five African states to the number of countries it approves as marketplaces for trading in equities. It is keen to take advantage of the pace of economic growth across Africa to garner profitable returns on equity investments.
Its investments in Nigeria, as at the end of 2014 was USD63 million (about N12 billion), which included stocks in companies listed on the Nigerian Stock Exchange (NSE). About USD15.6 million (N3 billion) or 23.5 per cent of the fund’s investments in Nigeria went into the stock of Zenith Bank while USD13.9 million (about N2.8 billion) or 21 per cent of the FPI went into Guaranty Trust Bank’s stock. The least in the allocation of its FPI in Nigeria went into Access Bank stocks at USD2.1 million (about N400 million) or 3.2 per cent.
Other stocks that benefited from this FPI include International Breweries Plc, Larfarge Africa, Nestle, Nigerian Breweries, Seplat Petroleum, Stanbic IBTC Bank and UACN Plc. The Norwegian SWF which has extended its FPI to include five more African countries in total has investment in 169 companies in Africa. Although the slump in global oil prices has hurt Nigeria, Africa’s largest economy, the International Monetary Fund (IMF) as well as several global economy watchers still project impressive growth rates for Nigeria and Sub-Saharan Africa generally.
Also, the number of middle-class households in the region has grown exponentially in the last decade. The Norwegian SWF is, therefore, determined to pour more cash into this emerging market, according to Ventures Africa, a major African economy publication. “Which new markets we enter depends on which markets are available for investment, what market opportunities there are, and market standards,” the fund said in its latest report. “We will continue to add new markets to the portfolio as soon as they meet our requirements for market standards.”
Although only 0.7 percent of the USD814 billion of The Norwegian SWF’s investment was in the continent by December 2014, the fund appears poised to increase its equity outlays in Africa. In a strategy report for 2014 – 2016 released last year, Norges Bank Investment Management (NBIM), manager of the Norwegian SWF, said it would add external mandates as it enters into new markets and segments.
It said it expects to have 100 external mandates by 2016, with the share of funds managed by external bodies expected to have risen by 5 percent. ”We use external equity managers for the majority of our emerging markets investments and for all our investments in frontier markets,” the fund said.
As Nigeria savours the harvest of commendations from the international community for the peaceful conclusion of the general elections, the stock market turned bullish from a two-week bear run pre-elections. This was at the backdrop of strong indications that more portfolio investors may seize the momentum to increase their stakes in the Nigerian economy.
*Emeka Anaeto – Vanguard