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  • Nigerian ETF A Potential Fund Belonging To The Next 11 0 comments
    Aug 7, 2013 4:51 AM

    The Nigerian ETF provides the preeminent exposure to the top most liquid companies in Nigeria, a country which is ranked as the Next 11 economies, by Goldman Sachs, this fund exhibits itself as the most potential player for investors that are looking for a long term potential fund.

    Nigeria has the largest demographic record as compared to any of the other countries of the same continent. Its strongest strength lies in the production of oil an important fuel input that is relied on by other economies of the world. 80% of the revenue collected by the Government comes from the energy sector. This shows how important and resiliently this sector influences the GDP of the economy. Though the rebasing of Nigeria's GDP is due since a long while, there is still a further delay. The rebasing would make an impact of an additional 40% to the GDP of Nigeria and would place it as the second largest economy of Africa after South Africa.

    The rebasing is done at a course of every 5 years in most economies, but Nigeria has not seen a rebasing of its GDP since the last twenty years approximately. The agricultural industry as well as the telecommunications industry is doing exceedingly well and bringing high yields into the economy. As a matter of fact the construction industry is also yielding good fruits. But due to the non-rebasing of the GDP, this growth is not being visualized properly. An increase in the foreign direct investment is expected to see a boon with special significance to the non-oil and agricultural sectors.

    As the country is an active member of the organization of petroleum exporting Countries this credit gives an enhancement to the potential of the NGE fund. The Nigerian Stock Exchange all share Index (NGSEINDX) shows a good increase of 21% as on date.

    At present the civil unrest affects the NGE and the pressure amounts on to the volatile industry with attacks on the oil pipelines and further assets but the slight drop in the Nigerian ETF can be ignored as the countries strongest revenue yielder, the energy sector, holds the competence to increase the positional value of the Nigerian ETF.

    Another important factor and concrete contraption worthy of giving a lift to the fund is the 41 percent allocation of the assets of the fund towards the financial sector, as the top holdings are held by the Banking services. The Nigerian banks are hedged by their risk management policies and their corporate governance, which gives them a firm grip on the economy. Nigeria mutual fund banks on the dominance of this sector and is a highly potential financial vehicle for the investors aiming for a cost effective and efficient exposure to this economy. The youth of this country is focused on the development and strategies of survival and is moving headstrong towards its goal. This gives the country a very dramatic push from the workforce, and when combined with economic liberalization, it navigates the economy towards an upward trend and up gradation of its middle class, further pumping new blood into the CONSUMER NON-DURABLES sector.

    The change in the trend of the investments towards the emerging markets has pulled the Nigerian etf out of the goodies bag. Emerging markets are being stressed and focused on more than the original domestic trend of investment. They are the latest flavor of the decade. If we see the different species of funds chosen by the investors, we can see that those economies that have a good financial sector and sturdy fuel companies are the ones that have the capacity to pull the investors towards them. Direct foreign investments are attracted to those economies whose benchmark index is dominated by these sectors. NGE is just that financial vehicle that fits magnificently in this basket. With a capacity to produce 2.5 million barrels of oil fuel in a day and an allocation of 41% to its financial sector, it scores very well among the other funds.

    The country has been caught by the entrepreneurial bug and has become an irresistible target for the investors. The CCECC, Chinese Civil Engineering Construction Company is planning to invest $ 1 Billion in the Nigerian Economy. They are focusing towards the construction of shopping- Malls, Hotels, Cement Factories and further real estates, keeping in mind the man power development.

    Global X Nigeria etf [NGE] yields as per the cumulative returns of the Solactive Nigeria index fund and its 28 most liquid and large cap equities which comprise the benchmark. The annual operational expenses are charged at 0.68% and with Guaranty Trust Bank Plc, 10.25% and Fbn Holdings Plc, 9.23%; Zenith Bank Plc, 8.40%, Nigerian Breweries Plc, 7.49% and Access Bank Plc, 5.31% among the top five stocks of the Nigeria Funds as on June 30, 2013.

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