The bulls regained momentum on Wednesday after about three straight days of losses. The daily performance of Nigerian stocks is mostly swayed by investor sentiments rather than fundamentals making a bullish or bearish trend rather difficult to sustain or predict. Sentiments like we all know is very subjective.
It is these same sentiments that have helped galvanized interest in Nigerian stocks in recent week as local investors take position ahead of a potential inflow of money from foreign investors. One foreign investor whose comments are followed closely by both local and foreign investors, is that of Mark Mobius.
Mark Mobius is the Executive Chairman of Templeton Emerging Markets Group and has around $700 million assets under management in its dedicated Africa fund, which has its biggest holdings in Egypt, Nigeria and South Africa.
He had this to say recently in an interview on the sidelines of an Africa investment conference;
“Probably now, it would be Nigeria, simply because they are in such a bad shape…..Everybody is concerned what is happening to the country … so Nigeria would be the place to look now…The naira is still a bit overvalued, so we could see a further fall in the naira”.
The Reuters article where his latest comments was reported also claimed he could add to its holdings in the country in the second half of the year on the following conditions; a further rise in oil prices, more outside investment in the power sector and a push on law and order in the impoverished but oil-rich Delta region as well as see more progress in how the government deals with the threat from militant group Boko Haram.
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So what does this mean? It is quite significant in that it is perhaps the first public confirmation from an investor of his standing that Nigeria is indeed now attractive to foreign investors. It probably also confirms that the flexible exchange rate policy is a step in the right direction but not a silver bullet as it does not guarantee an increase in foreign investor patronage in our capital market.
No one will invest in Nigeria if the political instability and insecurity persists. Yes, the naira float has happened, fuel subsidy has been removed and the budget has been passed but that is all not enough. It was always going to be difficult to get foreign investors back in after allowing them to leave in the first place due to the CBN’s reluctance to devalue the Naira. Mark Mobius in 2014 also claimed the second half of 2015 was probably the best time to invest in Nigeria again. He obviously did not invest because he knew other than an improved economy, other factors also matter.
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Retail Investors need to also take into consideration other factors such as those mentioned by Mr Mobius in taking investment decisions. No foreign investor will invest in Nigeria in an environment of fear, political battles and militant attacks.