Oil's Price Surge Spurs Nigeria's Flip From Discount to Darling

Nigerian assets are rallying across stocks, bonds and the currency as investor confidence builds in President Bola Tinubu’s economic agenda.
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The nation’s stock benchmark has climbed 63% this year in dollar terms, the best performance after South Korea’s Kospi out of 92 global indexes tracked by Bloomberg. That took its advance over the past 12 months to more than 200%. Local-currency government bonds have outpaced most emerging-market peers, while the naira is one of the top-performing African currencies.

Tinubu’s reset of the Nigerian economy included scrapping the costly fuel subsidies and multiple exchange-rates that had left the currency overvalued and deterred investors. Economic growth will accelerate to 4.1% this year, compared with 3.3% when Tinubu came into office three years ago, according to the International Monetary Fund. It also earned the country a credit-rating upgrade from Moody’s Ratings and Fitch Global Ratings in 2025.

With more credible economic policies in place, investors are returning to Nigeria’s capital markets. The rise in oil prices since the start of the Iran war has provided a budget windfall as the country relies on crude exports for about one third of government revenue.
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Foreigners bought 181.8 billion naira ($133 million) of Nigerian equities in March, up from 72.3 billion naira the previous month, according to the latest exchange data, even as the Middle East conflict sparked a global stock selloff.
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“Nigeria is transitioning from a credibility discount to an execution story,” said Romain Bordenave, an emerging-markets portfolio manager at Edmond de Rothschild Suisse SA. “The Iran conflict is definitely pushing Nigeria as an Africa darling.”

With a $105 billion market capitalization, Nigeria’s market is now bigger than New Zealand’s, and in the same league as Portugal, Ireland and Morocco, according to data compiled by Bloomberg.
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Among the best-performing shares this year are companies that benefit from economic growth: Bua Cement Plc is up 140%, Zenith Bank Plc has climbed 104% and MTN Nigeria Communications Plc, a mobile-phone provider, has gained 57%. Oil and gas exploration company Seplat Energy Plc has almost doubled, while rival Aradel Holdings Plc has soared 172%.
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The nation’s stock market received a boost when FTSE Russell recently announced the reclassification of Nigeria to frontier-market status with effect from September. Inclusion in the gauge would attract demand from index-tracker funds.

Meanwhile, the country’s stock market is also getting a vote of confidence from Africa’s richest man, Aliko Dangote, who plans to sell about 10% of his oil-refinery company in Nigeria, with additional listings on other African exchanges. The refinery has an estimated market valuation of between $25 billion and $45 billion.

“The FTSE reclassification is very positive for the Nigerian market,” said Samuel Sule, the chief executive of Renaissance Capital Africa. “Many global institutional investors track the index and as such, inclusion will attract increased market volume and activity. The Dangote refinery IPO is expected to deepen the market further.”

Still, Nigeria’s economy isn’t entirely protected from the risks of the Iran war. Despite Nigeria being the continent’s biggest oil producer, local fuel costs have climbed as international prices rose. The agricultural sector will take a hit from higher fertilizer prices, pushing up food costs and threatening a slowdown in inflation that took the consumer-price index to a five-year low in February.

“Even temporary volatility in oil markets could slow or reverse recent disinflationary trends,” Manji Cheto, a senior vice president at Teneo Holdings, wrote in a report last month. “This creates an asymmetric risk profile: higher oil prices raise domestic inflation quickly, while fiscal benefits accrue more gradually and remain partially constrained.”

For now, however, the outlook for the economy supports further gains, according to Michel Aubenas, head of emerging-market debt at BlackRock Inc. Local-currency bonds have returned 14% in dollar terms year-to-date, outperforming all major emerging markets except Argentina and Brazil, while the naira currency has strengthened almost 6%. Nigeria’s dollar bonds have returned 5%, compared with an average of 1.3% for emerging markets, according to Bloomberg indexes.

“We like the dollar-denominated debt and find the valuations very attractive, as well as the currency, provided they continue to be supported by ongoing reforms,” Aubenas said.

By Ray Ndlovu and Emele Onu, Bloomberg