T. Rowe Price: Nigerian Equities Still Has Growth Prospects Despite 64% Global Rally
South African bank looks to expand presence in Nigeria Emmanuel Addeh in Abuja Despite a 64 per cent year-to-date rally that has made Nigeria’s equities market the second-best performing stock market
Despite a 64% year-to-date rally that propelled Nigeria's equities market to second place globally after South Korea, investment firm T. Rowe Price maintains that the Nigerian market still holds significant growth potential. Johannes Loefstrand, who oversees a $310 million portfolio of frontier-market assets, expressed excitement about Nigeria's prospects, highlighting policy shifts such as the removal of fuel subsidies and the liberalization of the foreign exchange market as factors that have altered investor sentiment.
The Nigerian Exchange (NGX) has recorded one of the strongest performances globally this year, driven by improved macroeconomic conditions, stronger corporate earnings, and increased participation from domestic investors. However, limited foreign participation has been a challenge, with international investors facing additional market frictions due to the transition to a T+1 settlement cycle and uncertainty surrounding Nigeria's ranking in global equity indices.
T. Rowe Price is adopting a selective approach, focusing on individual companies and sectors with sustainable earnings potential rather than simply following the broader market rally. The firm already has investments in Nigerian giants like Guaranty Trust Holding Company Plc and Dangote Cement Plc. Nigeria's large population, oil status, and infrastructure needs present opportunities across multiple sectors.
Higher crude oil prices, supported by geopolitical tensions and supply disruptions, have also bolstered corporate earnings. Nevertheless, the broader macroeconomic environment and sovereign debt levels remain crucial considerations for African market investors. African Export-Import Bank data shows Africa's aggregate debt at $1.3 trillion in 2025, with debt expected to continue rising through 2029, albeit at a slower pace.
Countries addressing fiscal and economic weaknesses are more likely to attract long-term investment. Loefstrand also mentioned Kenya as another frontier market with longer-term potential, despite economic concerns. Nigeria's improved investment narrative is drawing renewed interest from global financial institutions. Absa Group, South Africa's third-largest lender, is considering converting its representative office in Nigeria into a merchant bank to diversify its revenue base beyond major African markets.
This move aligns with the company's strategy to reduce dependence on South Africa, Kenya, and Ghana, which collectively account for over 80% of its profits.
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