Chinenye Anyanwu, managing director and CEO of Dependable Securities Limited, a Nigerian boutique brokerage focused on small and mid-caps, lauded the Nigerian stock market’s recent rally, which came roughly a month after Bloomberg anointed it the “world’s worst market”, after it had fallen 37% YTD, the steepest quarterly decline in more than a decade and the worst of 89 benchmark indexes tracked (significantly underperforming its emerging/frontier markets peers).  Sub-Saharan Africa’s second-biggest share index closed Thursday at 25,294.10, and despite a nearly 2% drop on Friday, is still up substantially from the year low figure of 19,814.92 recorded mid April.

“In the first place, we should not have had the kind of meltdown we had because there was nothing fundamentally wrong with the market. The fundamentals of the quoted companies are strong and so people merely reacted because of what was happening in the advanced countries,” Anyanwu argued.

Yet volumes remain troublingly low, such that most observers feel a re-test of the bottom may be inevitable.  “This is not the beginning of a real rally. I think we will re-test the lows again before we see the real rally,” Zoran Milojevic, head of sub-Saharan Africa for Auerbach Grayson, a brokerage serving major U.S. institutional investors, told Reuters Africa.

That said, most analysts feel it is only a matter of time before foreign investors return to the fray and point to highly cash-generative blue chips with strong balance sheets–such as fast-moving consumer goods companies like brewers, sugar, cement and flour producers–as firms most likely to benefit once interest is renewed.

Renaissance Capital, a leading emerging market investment bank which predicted back in January a second-half recovery for the market, upped its equity exposure in the country three-fold to 30%.  Specifically, banks, which account for around 60% of stock market capitalization, are seen by many as some of the most undervalued plays at the moment.

“We like pretty much all of the top-tier Nigerian banks, simply because they’ve been hammered,” said John Mackie, Head of African Funds at Johannesburg-based Stanlib, which manages more than $2 billion in sub-Saharan Africa outside South Africa.  “Whether the growth is going to be there going forward is open to debate, it’s certainly not going to be the same sort of growth we’ve seen before, but when they’re trading around 0.4 to book, how much cheaper do you want them to get?”