How to invest in Nigeria


How to Invest in Nigeria?

Following our piece on Nigeria at the start of the year, we thought we would wait till the election was over to release our ‘How to Invest in Nigeria’ piece.

From our vantage, the results of the election were a runaway success.  Certainly, there were hiccups, but Nigeria asserted itself as a vibrant, emerging democracy.  As Nigeria’s Guardian put it, “Buhari’s Election: A Nigerian Victory.”  The market certainly speaks to this, having risen 9.3% since the election.

The Country

Nigeria is one of the countries in our Frontier Markets universe that does not need to be justified.  Its appeal is apparent.  It is the 7th most populous country in the world, with 174mm people and a forecast of a population of 440mm by 2050, making it the 3rd most populous country on earth.

With the opportunity of Nigeria of course, comes tremendous challenges as the country has remained on the brink of total collapse since its independence from the UK in 1960.  The country is a multicultural, multi-religious tinderbox ignited by natural resources and endemic corruption.  However, as with many countries around the world, corporates have learned to grow and thrive in even this challenging environment.

See Figure 1 below for a brief overview of the country.

Figure 1: Nigeria Factbox

Figure 1 - Nigeria Factbox

The country’s growth has been uneven and colossally disappointing given the inherent wealth of the area, but that being said it is important to be objective and recognize that it still has been growing, year-in, year-out.  See Figure 2 for GDP growth vs. returns from the Nigerian Stock Exchange (NGSE).

Figure 2: NGSE returns vs. Nigeria’s GDP Growth

Figure 2 - NGSE

Certainly not GDP growth that commands attention, but the index returns have been robust, particularly over the last five years.  Nigeria will grow and Lagos will eventually assert itself as a global centre of commerce and finance.  The conclusion is inevitable, the timing is questionable.

The Laws

Nigeria’s legal system is heavily informed by English law.  It is somewhat complicated by the administration of local/Muslim law within specific provinces, but this legislation is generally focused on social matters.  These courts are also the lowest level of Nigeria’s legal system.  The Court of Appeal and the Supreme Court are both heavily entrenched in English law.  For a fantastic overview of Nigeria’s laws, check out this NYU Law website.

Nigeria’s constitution was implemented in 1999 and reads very similarly to the constitution of other Commonwealth countries.  To view the constitution, see here.

The more challenging issue with Nigeria is the actual implementation of great laws.  Corruption is a huge issue.  The World Bank’s ease of doing business rank indicates the challenges with Nigeria.  From a legal perspective, it is one of the riskiest markets in the Frontier Universe.

The Stock Market

The Nigeria Stock Exchange was established in 1960, shortly after the country declared independence from the UK.  It remained nascent for quite some time.  Today, however, it is a thriving, growing exchange.  See Figure 3 below for an overview of the market.

Figure 3: NGSE Factbox

Figure 3 - NGSE Factbox

There are 58 companies with a market cap above $50mm USD and 11 companies with a market cap above $1bn.  This is a deep market with tremendous opportunity by Frontier Markets’ standards.  There are numerous companies that pay dividends and corporate governance for the listed equities is certainly a step above the norm for Nigeria.

See Figure 4 below to see a list of the listed companies in Nigeria with a market cap above $50mm.

Figure 4: NGSE Companies

Figure 4 - Company List

The listed companies are fairly diverse; in the top 20 listed companies you have Insurance companies, banks, oil & gas, household products, food products, industrials and conglomerates.  Even if you restrict yourself to the top 25 listed companies; the opportunities are attractive.

Can Foreigners Invest?

Yes, it requires a bit more work than other markets, but it is certainly doable.  Give yourself a lead-time of approximately 2 months and you should be well-positioned to invest.  The steps required are as follows:

  1. Open a CSCS Account. This is with the Central Securities Clearing System.  This requires you to have completed an individual account opening form, 2 passport photos, a certified copy of your passport, and a proof of address.  You can open this directly with the CSCS or via a broker.  A good overview of the requirements can be found here.   You have to actually courier these items to Nigeria.
  1. Open an account with a broker. There are over 100 brokers in Nigeria that are open to foreign investors.  For example, you have Zenith Securities, ARM Investment Managers, Stanbic, among many, many others.  Take your pick.  You will require the same information as needed for opening a CSCS Account, along with a CSCS Account Number.   Once an account is open, you will have to wire the funds to your stock broker.
  1. Begin trading.


Nigeria is hellishly expensive to trade in.  It costs about 1.9% to buy a stock for a retail investor and approximately 2% when you sell.  That’s almost 4% round trip, so it is really only a practical market for ‘buy and hold’ strategies.  Costs are declining, and I wouldn’t be surprised if within two years we have these fees below 50bps, but for now it is expensive.

As always, any questions, please let us know.

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