Sean Maguire’s Profile
Want to make clean money in Nigeria? Trade stocks.
One of the global themes that Reuters news editors have picked as a focus this year is ’frontier markets.’ These are less developed economies that don’t yet qualify as BRIC-style ‘emerging markets’ but which are gradually opening up to foreign portfolio investment. Fund managers eager to diversify from lacklustre, recession-battered Western economies are touting such markets as the next big hope for turbocharged returns.
One such place is Nigeria. The West African giant is the quintessential frontier market, with its mix of promising opportunity, political instability, a reputation for dubious financial practices, a resource curse and reform ambition.
Plunging in financially is still for the brave.
The state currently has two presidents (one on his death-bed and the other who is trying to get his hands firmly on the tiller); an amnesty keeping the peace in the volatile oil-producing areas is fraying; the banking industry is weighed down by bad debts incurred in a reckless lending boom; the Lagos stock exchange fell 70 percent in 2009 after brokers and banks connived to ramp up prices and it trades around $15-20 million a day, a tenth of the volume at the high point in May 2008. Outrageous inequality, crime, squalor, ethnic violence and chronic corruption are accepted as the norm.
But what country is perfect? Nigeria is far from the only place where the misbehaviour of bankers led to a national economic crisis. Clean-up efforts are underway. A bill to soak up the bad debt in banks is working its way through parliament and the Acting President, Goodluck Jonathan, has made a priority of preserving peace in the Niger Delta oil region. Nor is it the only country to suffer policy uncertainty thanks to the electoral calendar. Investors in Britain are as unsure of deficit policy after a likely May vote as investors in Nigeria are of the commitment to further economic reform after presidential elections in the first half of 2011. And on the upside let’s also recall an oft-mentioned but hard to ignore fact that the country offers an underserved market of 150 million eager shoppers.
So what will help you decide if Nigeria is a risky investment bet, or the next Eldorado? Information, of course. I visited Nigeria to help mark the fact that ThomsonReuters, the parent company of the Reuters news organisation, has begun to provide live stock data for the more than 200 companies listed on the bourse, instead of just indicative closing prices. It is part of its bid to promote its own business (of course) and to help develop a stock market battered by the 2009 bust and weighed down by distrust over past suspicious practices.
Before this begins to sound like an advertisement for my employer I’ll quote the head of the stock exchange on how price transparency can benefit Nigeria. (NB – full disclosure; ThomsonReuters is not the only company offering Nigerian stock price information).
More detailed information on local markets will help outsiders see Nigeria in a positive light, “for a change,” the director-general of the bourse, Ndi Okereke-Onyiuke, told a reception to mark the inauguration of the ThomsonReuters service.
“The world will know there are intelligent people here,” the feisty head of the bourse said. “It’s not all fighting and killing,” she added, lamenting that the recent world view of Nigeria was formed by images of hundreds of victims of clashes between Christians and Muslims over land, power and wealth in the central area of Jos.
Nigeria is no longer just a place of poverty and extreme wealth earned by those who “won the right to loot money,” she said. She was referring to notorious business tycoons and state officials who have garnered eye-popping wealth through patronage and the despoiling of oil revenue, little of which trickles down to ordinary citizens. The stock market was helping to finally create a Nigerian middle class, argued Okereki-Onyiuke.
“The stock market is the only place where you can come and make clean money with your brain and using information,” she concluded, categorically.