Foreign investors eye recovery in Nigerian markets

Wealth managers speaking in London two weeks ago at the Euromoney Conference on Nigeria jointly sponsored by African Alliance, an equity investment company, predicted that the capitalization of the Nigerian Stock Exchange–which currently sits between $60 billion and $70 billion–will quickly rise to $100 billion once the current global financial crisis subsides.  Said investors, citing the strength of the local currency, are also encouraging the country’s federal government to introduce a global dollar bond to the international financial market, which would enable Nigeria to fund infrastructure projects, among other opportunities.  BusinessDay reported that “investors appeared buoyed by the belief that the domestic currency will continue to be strong in spite of the continuous decline in global oil prices.  Francis Beddington, head of research at Insparo Asset Management, said: ‘The naira is not likely to be down, even if the price of oil stays at $30-$40 for a long time, which I expect it to do.’”

African mining sweats falling commodities

From yesterday’s Financial Times:

Labour unions are braced for job losses and forecasts for future orders are bleak.  Across much of sub-Saharan Africa, the story is the same. The region’s mineral resources have fuelled its recent growth, analysts at Absa Capital wrote. They now foresee depreciating currencies, widening deficits and evaporating mining investment in at least 11 countries. Mozambique’s fortunes are inextricably linked to its bauxite seams, as are Namibia’s to its diamond fields. Each relies on commodities for two-thirds of their exports.

Money can grow on trees

Last month Peter Bartlett’s Exotix Limited secured financing for UK-based New Forests Company’s sustainable forestry operation in Uganda.  The New Forests Company is a plantation timber firm with operations in Uganda and Mozambique.  It has become the largest tree planter in Uganda and expects to plant almost 4.5 million trees this year. The company combines sustainable commercial forestry and the protection and promotion of biodiversity with community participation.  Commenting on the deal, Exotix’s Sanjeev Chhugani said, “Early stage forestry businesses have low cash flows in the initial years, but once the trees reach a certain age, the picture changes dramatically. Not only do the assets literally grow, so does the holding value of these assets. With increasing global demand for timber, investing in sustainable forests is essential. New Forests’ impact on the surrounding communities will be phenomenal. While many of our alternative investment clients are focused on assets that can be marked to market on a short term basis, we had to find a strong investor with a long term outlook, a passion for Africa and a pragmatic approach to ‘green’ investments. Money can grow on trees.”

Julian Ozanne, CEO of New Forests, commented that “with our institutional round of funding concluded, we can focus on planting more trees and extending our biodiversity and community development initiatives. We have a solid team of very experienced and passionate people who are extremely knowledgeable about forestry and are committed to successfully and profitably expanding our operation within Uganda and across Africa.”

Debunking “Decoupling”

From Standard & Poor’s “The Outlook”:

The MSCI-EAFE index, a developed international equity benchmark, is now moving in unison with the S&P 500 index 89% of the time, up from 80% on August 31. Similarly, the MSCI Emerging Markets index’s correlation to the 500 has jumped to 81% from only 68% two months ago. Worse yet, the MSCI Frontier Market index, long touted for its ability to ‘zig’ when the 500 ‘zags,’ has seen its 500 correlation surge to 63 percent from a mere 9 percent on August 31.”