The Stern Opportunity

Issue date: 3/10/09 Section: Voices

The restive giant market of Nigeria was down 46% in local terms, and lost $23bn of market cap to close the year at $49bn. My prediction is that it will take a while to regain all those billions that were wiped out in a rout largely fueled by the country's dependence on oil, which accounts for 95% of FX earnings, 65% of government revenues, and 20% of GDP. Like other natural-resource rich economies in Africa, Nigeria is actively looking to broaden its revenue base and diversify its economy further.

So what are the prospects for investing in Africa in 2009? A panelists last Friday at the Global Business Conference's "Entrepreneurship in Frontier Markets: Financing New Business in Africa" panel had varied views on growth drivers for the continent in 2009 and 2010. One common theme was that the strong growth experienced by most countries will continue at a slightly abated rate, with exceptions being South Africa and one or two North African economies struggling to eke out 1 or 2% GDP growth rates. However, competition for Africa's resources from India, China, Europe and USA has the potential of driving more robust infrastructure development and investments in education, which should create jobs and spur even more innovation if well managed.

Thus the outlook remains positive, and while investment vehicles on the continent may not be as complex as in the US, valuations on African markets are looking quite attractive and will most likely offer some pop this year. The benefits of diversification have shrunk considerably as correlation in equity markets has increased globally. All the same, African markets are worth serious consideration for investments and data for intelligent bar blast conversations.

< prev Page 2 of 2

Article Tools