Investing in the “Giant of Africa”


  • The best way for the common investor to gain public equity exposure to Africa is via ETF’s that track listed equities in African countries such as The Global X MSCI Nigeria ETF, or by investing directly through investment houses operating on the ground.
  • Nigeria is considered the biggest economy in the continent via GDP, although South-Africa usually has the spotlight due to its deeper capital markets
  • As highlighted above, currently various ETF’s have exposure to Nigeria such as The Guggenheim Frontiers Markets ETF, The EG Shares Beyond BRICs ETF and The Global X MSCI Nigeria ETF

With Trump increasing the volatility of your holdings on the tech sector and with all the upcoming elections in Europe, you are most probably looking for a way to diversify your portfolio. The time has come again to look to Africa.


Figure 1 – Tochukwu Ezeoke (TJ) from the FMO – Dutch Development Bank and RSM Full-Time MBA 2017

Tochukwu Ezeoke, affectionately called TJ by his friends, currently a Private Equity intern at the FMO – Dutch Development Bank and graduating this month from the Full-Time MBA at RSM, helped us to have a better understanding of this promising continent and particularly of his home country: Nigeria.

Investing in Africa

For the Investment Groups at B&R Beurs, practically the only way to invest in Africa is through Exchange-Traded Funds (ETFs). This type of fund owns the underlying assets (e.g. stocks of African Companies) and divides ownership into shares. Therefore, although we indirectly own the assets, we get instant diversification with a cheaper expense ratio and no minimum deposit requirements.

South Africa has been the most common path to invest in Africa and the most popular South African ETF is the MSCI South Africa Index Fund (NYSE: EZA) , which gives the investor exposure to large and mid-sized companies in the Country, such as Naspers (Media and Internet), MTN Group (Telecommunication) and Sasol (Energy).

Nevertheless, a fact unknown to many, is that the title for the biggest economy in Africa has been in recent years fiercely disputed between South-Africa and Nigeria. The number one position depends usually on exchange rate movements, and, according to TJ, “a simple fact differentiates Nigeria from the rest of the African countries: it is Africa’s most populous country, with approximately 180 million inhabitants, three times more than South Africa for example”.

Nigeria – the “Giant of Africa”

One in four Africans is a Nigerian. Nigeria is not only the most populous country in Africa but also the seventh most populous in the world. It has been undergoing an explosive population growth, 60% growth in less than twenty years, with one of the largest youth groups in the world. As TJ says, “with this vitality, the country is inevitably in an upward trend, with increased possibilities of innovation, for example in the area of renewable energy”.

A member of the MINT (Mexico, Indonesia, Nigeria, and Turkey) group of countries,considered the next “Bric-like” economies, Nigeria has a nominal GDP of about $500 billion, and is identified as an emerging global power. On the back of data from the National Bureau of Statistics (Nigeria’s statistics Bureau) GDP is divided into two main parts, oil and non-oil. As of the most recent data (Q4’2016) the oil sector contributed about 7.15% of GDP while non oil sectors contributed the balance 92.85%. With abundant natural resources, it supplies a fifth of the United States oil. Agriculture, on the other hand, is still important in Nigeria, to the point that still around 30% of the population works on the sector. Cocoa and rubber are two of the major crops. It may come as a surprise to many, but another flourishing sector in Nigeria is telecoms, with one of the fastest growing rates in the world. Many innovations that are now entering Europe, for example mobile payments, are already a standard procedure in Nigeria.

The challenges of Nigeria

Nevertheless, as TJ puts it, “the true potential of the country is still to be unlocked and various issues are currently blocking a faster development and growth. Issues such as forex scarcity, lack of infrastructures and power, inadequate government policies, import dependency, low intra-trade within Africa and regional conflicts”.

Forex scarcity is a deeply rooted issue in Nigeria as the decision of the government to subsidize petrol consumption, although very popular with the electorate, is damaging the forex reserve of an import dependant nation. The spread between the official and parallel dollar exchange rates was over 60% in early 2017. However, this spread has been reduced as the federal government rolled out certain economic policies which cooled the over-heated FX market. Current politics are therefore counterproductive, and unpopular measures are usually not chosen in favour of temporary solutions.

Power scarcity is another major issue, and as TJ points out, “a quick look at the average power per capita in Nigeria will show you how big this issue is, currently it is one of the lowest in Africa”. Following his advice, here is a list comparing other countries to Nigeria.

Table 1 – Average Power per Capita (source: CIA World Factbook)

There are undoubtedly vast opportunities for foreign investors also in the energy sector, and a better power structure would most probably give the necessary acceleration to the already promising growth in the country. There is also a silver lining to the table above: not all electricity consumption in Nigeria can be properly measured because about 80% of the population generates electricity through alternative sources and Nigeria can establish itself in the future as one of the leaders in renewable energy.

FMO and Nigeria

TJ is currently doing an Internship on the Dutch Development bank, also known as FMO. They invest in more than 85 countries assessing the impact, sustainability and long-term viability of each proposal. In this way, the FMO is contributing both directly and indirectly to the Sustainable Development Goals established by the United Nations. It comes therefore as no surprise, that the recent investments made in Nigeria by the FMO, are aiming to resolve the challenges discussed above. Examples of past investments are the ones made in the African Foundries (Infrastructure), Azura Power West Africa (Enery), and Ecobank (Financial Institution). Fortunately for the common investor, as an example, it is also possible to have exposure to Nigeria via ETF’s. The next chapter will elaborate on this.

Investing in Nigeria for the common Investor

As stated in the beginning of the article, for the common investor, the best way to invest in Africa is through ETF’s. Although South-Africa is usually the main target, fortunately there are now more options to have exposure to Nigeria.

The Global X MSCI Nigeria ETF invests in some of the largest and most liquid companies in Nigeria and in their top 10 holdings there are 3 Financial Institutions where FMO has also invested in the past: Ecobank, Stanbic and Access Bank. As a curiosity, this ETF also has a holding on the company of the one who is considered the richest black man in the world: Alhaji Aliko Dangote, owner of the Dangote Group.

In conclusion, for the informed investor, here is a fairly comprehensive list of EFT’s that have exposure to Nigerian companies, the first of them exclusively (as already stated), the others not exclusively:

Table 2- ETF’s with exposure to Nigeria (source:


Written by Alex Matoso