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  • Nigeria Index ETFs To Play On Africa And Her Oil? 0 comments
    Apr 25, 2013 12:37 AM

    Traditionally careful, analysts at Gold man Sachs are quite candid in advocating the Nigerian Economy amongst one of the 'Next Big 11', a term which they use to categorize the fastest growing countries in the world, mostly frontier but have a potential to participate majorly to the global economic growth.

    As per World Bank 2013 report the country has more than 90 million of population which is less than 25 years and the PPP [Purchasing Power Parity] has gone up upwards of 300% since 1981.

    Nigerian nation enjoys maximum FDI incoming among all African economies and this is only going to increase in wake of the nation's oil and gas sector undergoing reasonable liberalisation where as much as seventeen oil companies are lined up for privatisation.

    Now, because it is the biggest oil producer on the continent and accounts for a sizable global production, it is natural that with an improved investor sentiment, the sector and equities will get an early bird advantage. The Financials stocks may find takers owing to the anticipated infra structure growth and their current vestments in the oil and power sector itself.

    It is most densely populated on the African continent with a headcount of 160 million, is also the biggest oil producer in the area.

    A pro growth government managed to attract bout $9 billion worth of foreign investments in 2012, for the current year, the target is 16 billion.

    Latently enough, the Nigerian ETFs may again add to this as they enable easy exposures for the retails foreign investors and the fund managers will eventually be investing in the concerned equity market. Performance of similar products introduced earlier with a focus on other frontier economies of the world is known to all and the pattern may be most suitably repeated in case of this West African investment.

    Nigeria of today is growth centric and requires a constant job growth to suffice a massive young population. Understandably it is just the beginning for the economy and it is gradually opening to the world.

    The expansion scope lies in most areas and the national enterprises, businesses and their equities involved may show good growth. The laggards in this case are the socio--economic issues including a lack of infrastructure and industrialisation which puts direct equity route in the High Risk /Reward category and added up with the foreign investment compliance issues has been a biggest deterrent to the incoming capitals.

    In the oil industry heavy Nigeria funds may be used to diversify portfolios already centric on the sector or for those who, when investing, keep Africa in focus.

    If the 2002 liberalisation drive of Telecom Industry in Nigeria and its progressive growth is of any indication, then Nigerian Index funds are well capable of outperformance due to the global positioning of the nation's oil markets and most importantly, because it provides a cost effective route to enter the asset class which was earlier available only to institutional investors and that too, at much higher costs.

    "Folks seeking to play on these growth dynamics must limit their investments in the Nigerian oil and gas sector and financials, both of which needs are easily met through a Nigeria ETF or a Nigeria mutual fund via their standardised exposure to most heavily traded equities from the national stock market. A fact that the product is Solactive Index attuned add up to the security of the principal and being market traded, these funds allow a reasonable liquidity."

    Global X Nigeria index fund delivers as per the performance of The Solactive Nigeria Index that tracks the 28 most liquid and large cap equities from the Nigerian stock market and the securities of companies, which have majority revenues coming from their operations in the nation. The Index is designed to track the overall growth of the African nation and works as per the logics of the Global X proprietary investment solution developed by AG & G Structured Solutions, Germany.See top holdings for Nigeria fund, NGE ETF

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