![\"\"](\"https:\/\/www.africa-press.com\/nigeria\/wp-content\/uploads\/sites\/3\/2019\/02\/naira-300x216.jpg\")
<\/p>\nA\u00a0surprise delay in Nigeria\u2019s presidential ballot\u00a0has served foreign asset managers another reminder of political risk and volatile investment returns in Africa\u2019s biggest economy \u2013 just days after piling into assets in a bet on a smooth election run.<\/p>\n
The electoral commission\u00a0announced a week\u2019s delay to voting in the early hours of Saturday, citing logistical problems, even as some of Nigeria\u2019s 84 million registered voters were already making their way to polling stations.<\/p>\n
The vote pitches President Muhammadu Buhari against former vice president Atiku Abubakar, in what is seen as a tight race.<\/p>\n
The delay adds to uncertainty for investors, who have endured a wild ride in the West African country: The 2014 oil price crash, and election in 2015 followed by currency controls and dollar shortages that tipped the oil-exporting economy into recession in the same year, its first in more than two decades. Its bonds got ejected from key indexes.<\/p>\n
A new exchange rate mechanism launched in 2017 drew back some investors but concern has built around the election that has proved hard to call, threatens to spark violence and promises little material change.<\/p>\n
\u201cThe likelihood of violence is now higher than before,\u201d said Thierry Larose at Vontobel Asset Management. \u201cAnd we have seen some effect on markets.\u201d<\/p>\n
Below are four charts that show foreign investor exposure and positioning in Nigeria.<\/p>\n
<\/p>\n
FLOWS COMING BACK<\/strong><\/p>\n Lured by a rekindled appetite for emerging markets and an upbeat oil price outlook, foreign investors have recently raised exposure to Nigeria, according to flow tracker EPFR.<\/p>\n Nigeria\u2019s debt, in particular, has seen a sharper acceleration of inflows since the start of the year than emerging market debt more widely.<\/p>\n TAKING STOCK<\/strong><\/p>\n Nigeria\u2019s debt may have got kicked out of key indexes, but its stocks escaped a similar fate. They comprised a chunky 6.4% in 2017 in MSCI\u2019s frontier market index of smaller and often riskier stocks.<\/p>\n Year-to-date, MSCI\u2019s Nigeria index has risen just over two percent, with an eight percent jump in February making up for losses earlier in the year. Broader frontier and emerging equities have performed better, however.<\/p>\n Moreover, trading volumes have decreased steadily overall, and the percentage of foreigners trading has also shrunk to 48% from a peak of 65% in September 2017, according to stock exchange data.<\/p>\n \u201cThis is a deeply unloved market whether measured by overall market volumes, foreign participation, valuation relative to history, or performance versus frontier or oil-exporter peers,\u201d said Hasnain Malik at Exotix Capital. \u201cThat level of despair usually means opportunity.\u201d<\/p>\n EXTERNAL OUTPERFORMER<\/strong><\/p>\n With the International Monetary Fund estimating Nigeria\u2019s debt-to-GDP ratio at just under 27% in its 2018 outlook, the country compares favourably to the Sub-Saharan average of 50%.<\/p>\n Nigeria\u2019s dollar-denominated debt has long been a favourite off-benchmark play.<\/p>\n The issues have outperformed both wider emerging market sovereign debt and African peers, returning some 10% year-to-date.<\/p>\n \u201cEurobond valuations still look attractive as yields are likely to remain anchored regardless of the outcome and the election means we are unlikely to get issuance until 3Q,\u201d said Diana Amoa, emerging market debt portfolio manager at JPMorgan Asset Management.<\/p>\n LOCAL LURES<\/strong><\/p>\n Investors are split on local debt markets. On T-bill markets, the arbitrage between high yields and stable hedging costs through currency forwards delivers solid returns for anything up to a year. The picture is less clear further out.<\/p>\n \u201cWe continue to like the t-bill trade as it\u2019s an attractive carry play on oil,\u201d said Kevin Daly, investment director at Aberdeen Standard Investments in London.<\/p>\n Others say the trade has become too crowded. And plans by presidential contender Abubakar to possibly float the naira currency makes it a risky play.<\/p>\n \u201cIt is like picking up pennies in front of a steam roller -you pick up a lot of pennies, but the losses are huge if the steamroller gets you,\u201d said Lutz Roehmeyer at Capitulum Asset Management.<\/p>\n","protected":false},"excerpt":{"rendered":" A\u00a0surprise delay in Nigeria\u2019s presidential ballot\u00a0has served foreign asset managers another reminder of political risk and volatile investment returns in Africa\u2019s biggest economy \u2013 just days after piling into assets in a bet on a smooth election run. The electoral commission\u00a0announced a week\u2019s delay to voting in the early hours of Saturday, citing logistical problems, […]<\/p>\n","protected":false},"author":62,"featured_media":5047,"comment_status":"open","ping_status":"closed","sticky":false,"template":"","format":"standard","meta":{"footnotes":""},"categories":[24,15,28],"tags":[316,97,106,38,251,158],"class_list":["post-5045","post","type-post","status-publish","format-standard","has-post-thumbnail","hentry","category-all-news","category-economy","category-homepage-english","tag-atiku","tag-buhari","tag-economy","tag-election","tag-inec","tag-presidency"],"yoast_head":"\n