Nigerian vote could bring back foreign money

Nigerian stocks rose their most in more than one month on Monday to the highest since mid-March as the completion of presidential elections held the promise of renewed inflows of foreign money.

Although rioting erupted in largely Muslim northern Nigeria after results showed victory for President Goodluck Jonathan, Nigeria’s All-Share Index rose 2.8 percent to cross the psychologically important 25,000 level.

Protests in the strongholds of opposition leader Muhammadu Buhari are far from the oil-producing regions of the Niger Delta and the main industrial centres of the south.

“Investors will be reassured by the fact that a run-off has most likely been avoided,” said Alan Cameron, London-based economist for Nigerian stockbroker, CSL.

“If the final result is as decisive as these first figures suggest, Jonathan will have a strong mandate to press ahead with his economic reform agenda, and this will likely be seen as very positive for markets.” Other assets ‑ the country’s debut Eurobond and naira currency ‑ were broadly steady after the election, with analysts anticipating a rally in the coming weeks.

“The past weekend’s successful elections in favour of the incumbent could see further improvement in market sentiment,” Bank of America Merrill Lynch said.

“The naira most recently weakened from early April … but could now find some support, the bank said in a note to clients.

The naira last traded at 154.86 to the dollar. The yield on the eurobond was 6.376 percent.

Despite the violence in the north, analysts said risk perceptions for Nigeria had improved after the election and a Jonathan victory should ensure policy continuity.

Because he is from the oil-producing Niger Delta, his election could also avert any resumption of troubles there which might have been on the cards if he had lost. Share purchases by foreigners almost doubled last year to 381 billion naira ($2.5 billion) and expectations are strong for further inflows if the post-election disturbances are contained.

“We will see a lot of investors coming back to Nigeria,” Rencap’s West African chief executive, Rotimi Oyekanmi, told Reuters. “Share prices are low … which shows there’s real upside in Nigeria.” Nigerian banks have repaired balance sheets and returned to profitability after heavy write-downs and loan loss provisions in the wake of a $4 billion sector-wide bailout.

First Bank and United Bank for Africa, two of Nigeria’s top lenders by assets, both posted better than expected pretax profits last week.

A fund manager at London-based Renaissance Asset Managers shared the generally positive outlook on Nigeria but said much more than the election was needed for a sustained market rally. “I think where you will see much of a change is as infrastructure begins to roll-out which will create more opportunities,” said Sven Ritchter, head of frontier markets.

“You may see some changes in the stock market and Eurobond but the election in itself is not enough to make the kind of changes we anticipate for larger amounts of money to come in.”

Source : 234next