Nigerian stocks have sidestepped the selloff in global equities, partly because foreign investors trapped by currency constraints have little option but to double down on the Lagos market.
The NGX All Share Index has rallied 24% this year to the highest since 2008, as of Wednesday’s close.
By contrast, a measure of emerging-market frontier stocks is down 11% and the MSCI World Index has plunged 18%.
While most foreign investors have fled the Lagos market because a shortage of hard currency has hobbled their ability to repatriate returns, those who are left holding Nigerian shares have been channeling dividend payouts back into local equities.
Stronger-than-expected earnings from companies like MTN Nigeria Communications Plc and Nigeria Breweries Plc has also stirred interest in stocks among residents.
Major companies “have surprised to the upside and seem to be attracting some local institutions back into the market,” said Ayo Salami, London-based chief investment officer at EMIM Investment Management.
“Foreign investors are reinvesting their dividends in the market given the inability to repatriate naira into dollars.”
The Nigerian central bank’s effort to maintain foreign-exchange reserves has led to dollar shortages and long waits for portfolio investors trying to take funds out of Africa’s largest economy.
That’s had the side effect of shielding the Lagos stock market from the concerns over rising rates, inflation, weakening growth and the war in Ukraine that are weighing on equities worldwide.
While the market may hold on to its gains for the first half of 2022, locals are likely to be tempted to cash in profits later in the year, said Usoro Essien, an equities analyst at Johannesburg-based Rand Merchant Bank.