Nigeria: Global X Nigeria Index ETF (NGE)
I’m going to start with a country that probably will make you do a double take: Nigeria. You can get access to Nigerian stocks via the Global X Nigeria Index ETF (NGE).
I would assume that two questions immediately popped into your mind because they are the same two questions that immediately popped into mine:
- Nigeria has a stock market?
- And it’s not a scam asking you to sign your bank account over to the “rightful king of Nigeria” or some such nonsense?
Yes, Nigeria does have a stock market, and no, it’s not a scam. Companies engaging in email and fax scams on hapless Americans only comprise about 34% of the index.
That was a joke, of course. Nigeria’s stock market is full of companies that are well-positioned to profit from the country’s burgeoning consumer economy, such as Nigerian Breweries and Nestle Nigeria, a local subsidiary of Swiss confectionery giant Nestle (NSRGY).
Financial services make up more than 40% of the index, with energy making up another 20%. Those are higher concentrations than I would ideally like to see, but I don’t consider them major negatives.
Why invest in Nigeria? Let’s start with growth. From 2005 to 2013, Nigeria has averaged 6.8% GDP growth, making it one of the fastest-growing countries in the world. And the country sailed through the 2008-09 global crisis with barely a blip.
But more broadly speaking, I consider Nigeria part of a larger African growth story. African per capita GDP has more than doubled in the past decade, and according to Deloitte, 7 of the 10 fastest-growing countries in the world are in Africa.
Africa’s middle class is already well above 300 million people, or a little more than a third of the population. It’s a block of consumers comparable in size to the middle classes of China and India.
Looking at valuations, the stocks comprising the index trade at an average P/E ratio of just 11 and an average price/sales ratio of just 0.7.
Nigeria is still very much a frontier market. It’s at a much earlier stage of development than, say, China, Mexico or Brazil. But I also consider it one of the most promising markets for 2014 and the remainder of the decade.