Emerging markets guru Mark Mobius is bullish on Nigeria and says now is the time to invest in the region, despite the country falling out of favour with many investors last year following “a series of unfortunate events”.
Mobius, who oversees the management of the £2bn Templeton Emerging Markets trust, says Nigeria’s stock market suffered last year as a result of turbulence in the region, including the terrorist acts of Boko Haram, the Ebola outbreak and the falling price of oil, a major source of income for the government.
However, Mobius remains sanguine on the investment opportunities in Nigeria on the grounds it has one of the fastest-growing economies in the world and is set to see government reform following the election and subsequent change of president in March.
“We continue to pursue long-term investments in Nigeria for a number of reasons,” Mobius says. “Not only is Nigeria Africa’s largest economy and a major consumer market, but the outcome of Nigeria’s presidential election in March proved its people are ready for change – hopefully for the better.”
“We feel [president Muhammadu Buhari’s] military experience should help him battle terrorism and corruption in Nigeria, so in that sense the election results seem positive.”
While Mobius recognises that lower oil prices are a challenge for Nigeria, and will mean the government needs to find new sources of income, he notes that government debt is only 13 per cent of GDP and fiscal policy from the 2015 budget should prevent the government facing funding issues this year.
He says: “While important to the economy the oil and gas sector actually equates to less than 15 per cent of Nigeria’s total GDP. Nevertheless, the oil price decline has prompted the government to reduce its 2015 GDP growth forecast to 5.5 per cent, down from an estimated 6.23 per cent in 2014, [but] GDP growth still looks to remain strong this year.
“Nigeria is a big country, and with privatisation and government reform efforts, I still believe there is a good chance of strong growth going forward, even if oil prices don’t rebound significantly from today’s levels.”
Financial services is one of the main sectors of interest to Mobius due to the people of Nigeria being “under-banked” compared to other markets, with local banks likely to benefit from long-term economic growth.
Mobius adds: “There are significant challenges ahead, but we believe the positives outweigh the negatives and think it’s a good time to invest in Nigeria, if we are patient and selective.”
Credit: Fundweb
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