Foreign investors see opportunities in Nigeria

Nigeria's investment landscape is attracting attention from international investors as opportunities in the market continue to expand. According to KPMG’s Doing Business in Nigeria report, 62 per cent of international businesses surveyed are considering investing in Nigeria in the next two years. Jamil Toyo, Deputy Managing Director at Allan Gray Nigeria, joined CNBC Africa to discuss the current investment climate in Nigeria and the potential for growth in the market. Toyo emphasized Allan Gray's long-term view on investments and their strategy of seeking opportunities where they believe there is significant value that is not reflected in pricing. He noted that between 2016 and 2017, the market experienced a downturn in valuations due to negative sentiment, creating buying opportunities for investors. This trend has led to a resurgence of interest from investors looking to capitalize on undervalued assets. One sector that has garnered attention from foreign investors is the banking industry. Toyo mentioned that banks in Nigeria have been posting strong numbers, and the yields, especially on Eurobonds, are particularly attractive. The increase in valuations for banks has led to better dividend yields, making them a favorable choice for investors. However, Toyo stressed the importance of being discerning in stock selection and evaluating risks beyond just valuations. In addition to equities, Toyo discussed the attractiveness of treasury bills and fixed income investments in Nigeria. Despite the country's political risks, the high returns offered by Nigerian investments remain appealing to investors. As the federal government looks to reduce its presence in the domestic debt market and increase foreign borrowing, there may be concerns about potential pullbacks in foreign investment. However, Toyo highlighted Allan Gray's long-term investment horizon of three to five years, focusing on fundamentals rather than short-term market fluctuations. When asked about the outlook for the market for the rest of the year, Toyo explained that Allan Gray doesn't engage in forecasting market dynamics but instead focuses on understanding specific companies before making investment decisions. By analyzing individual businesses and economic factors, Allan Gray aims to make informed and strategic investment choices. Overall, the outlook for foreign investment in Nigeria appears positive, with international investors recognizing the growth potential in the country's market. Despite inherent risks, such as political uncertainties and market volatility, Nigeria continues to attract interest from investors looking to benefit from its expanding economy and valuable investment opportunities.