Investors keen on Nigeria despite disputed polls
Tue 8 May 2007, 11:52 GMT
[-] Text [+] By Estelle Shirbon
ABUJA (Reuters) - Foreign investors are mostly upbeat about opportunities in Nigeria despite political uncertainty generated by elections last month that were widely condemned as fraudulent, fund managers and bankers say.
Outgoing President Olusegun Obasanjo, whose free-market reforms launched since 2003 have been popular with investors, is due to hand over on May 29 to Umaru Yar'Adua, who has said he will continue the reform process.
Yar'Adua's election was deemed "not credible" by international observers who reported widespread vote-rigging, but investors said the fact that there had been an election, no matter how flawed, was reassuring to them.
"The worst case scenario didn't happen. We didn't have anarchy. The market likes that," said John Niepold, portfolio manager at U.S. investment firm Emerging Markets Management, which has more than $100 million in Nigerian equities.
Nigerian stocks have offered spectacular returns over the past two years, especially since a new law came into effect last year forcing Nigerian companies to set up pension funds that are looking for outlets for their money.
The Nigerian stock exchange has increased in value by about a third since the start of this year, led by banking stocks that have been popular since a forced consolidation of the sector -- one of the achievements of Obasanjo's reform team.
Foreign firms' interest in Nigerian banking has also increased as they look for a permanent foothold.
Africa's top banking group by assets, Standard Bank, announced in February it was merging its Nigerian unit with local investment bank IBTC and would take a controlling stake in the new firm.
"The perception is that Nigeria is still quite an attractive place to invest," said Francis Beddington, Standard Bank head of research on central and eastern Europe, Middle East and Africa.
TELECOMS DEALS
The fast-growing telecoms sector has attracted keen foreign interest, and the enthusiasm has not abated.
Alcatel-Lucent has announced contracts worth at least $600 million with local firm Globacom in the past three months, while in January Mubadala of Abu Dhabi bought a GSM licence for $400 million -- among other recent deals.
Oil is by far the biggest area of foreign investment in Nigeria and that has proven for decades to be resilient. While some multi-billion dollar investment projects have been delayed by unrest in the oil-producing Niger Delta, interest in new exploration areas, especially offshore, is still strong.
Recent non-oil private sector growth has come against a backdrop of deregulation and unprecedented spending curbs introduced by Obasanjo's reform team. They saved windfall oil earnings, won $18 billion in debt relief and secured BB- credit ratings from Fitch and Standard & Poor's.
"The key thing is whether the reforms continue under Yar'Adua," said Jonathan Chew, head of Imara Asset Management which has about $15 million in Nigerian equities.
He added that portfolio investors were far more interested in company specifics than in politics, and as long as the government kept its hands off the private sector the current momentum could keep Nigeria moving forward for a few years.
Some bankers said they hoped Yar'Adua's legitimacy problem would spur him to enact swift reforms.
"He is starting out on such a horrible note that he really has to work hard to make his tenure positive for Nigeria," said a London-based investment banker who did not wish to be named.
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