Nigeria ETF puts country in investor spotlight

The recent launch in April 2013 of the Global X Nigeria Index ETF (Exchange Traded Fund) helped to put the country in the spotlight of investors globally.

The Nigeria ETF is listed on the New York Stock Exchange (Ticker: NGE) and provides an easy way for US and global investors to invest in Africa’s second largest and fast growing economy.

The ETF is classified as “Frontier” fund, which is the segment further down on the development scale after emerging markets.

The NGE which allocates 41 percent to financials and 24 percent to energy companies is also skewed toward assets that stand to benefit from the growth of Nigeria’s consumer economy, with consumer goods companies having a 25 percent weighting, and cement companies 6 percent.

The household income of the Nigerian consumer seems to be growing according to anecdotal evidence.

The latest personal consumption figures for Nigeria are larger than the current estimated Gross Domestic Product (GDP) of $272 billion (N42.9 trillion), Yemi Kale the head of the National Bureau of Statistics (NBS), said recently in an interview.

Household consumption expenditure (HCE), the largest component of GDP by expenditure; was equivalent to 61 percent of GDP in 2011, according to NBS data.

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The size of the Nigerian economy increased by 61 percent between 2009 and 2012-driven by a stable macro-economic environment underpinned by fiscal and monetary reforms – as nominal GDP rose to $273 bn at year end 2012 from $169bn in 2009, data from investment Bank Renaissance Capital show.

Growth averaged 7.2 percent per year for the period according to International Monetary Fund (IMF) estimates. NGE, the fund will have 28 holdings, charge a 0.68 percent expense ratio and any dividend payout will be once a year, according to the prospectus.

The top five holdings of the ETF are Guaranty Trust Bank with a weighting of 10 percent, First Bank of Nigeria (9.9 percent), Zenith Bank (8.1 percent), Nigerian Breweries (7.4 percent), and Access bank with a 4.6 percent weighting.