Nigeria has voted and we are proud to say that democracy has won and profound moment in Nigeria’s history. We wanted to share with you some input on this historic event and on our outlook for Nigeria’s capital markets going forward. Attached you will find the link to our outlook: http://www.silkinvest.com/wp-content/uploads/2015/04/Silk-Invest-Nigeria-Outlook-2015.pdf.
In summary we want to highlight the following:
- Over the past 18 months, Nigeria’s equity market performance has been consistently poor having lost 38% from end of 2013 compared to the emerging BRIC markets, which have lost less 3%. We believe that the Nigerian election results will act as real catalyst and that the market could go up 30-40% in the coming months.
- Bond and currency markets look equally attractive. Within local currency markets, yields have significant room to tighten and based on the current inflation trend, we foresee local government yields moving back below 13%. On the hard currency side, spreads are 1% higher than long term averages.
On the political side, we wanted to share with you our reading of the situation. Africa’s biggest democracy held its much anticipated general elections this weekend, this being the continent’s most anticipated general election and it did not disappoint. There were a few issues such as administrative problems with some card readers failing to work and some violence in the North but overall, unlike in the previous elections, there was a much greater enthusiasm to vote by the electorate. Nigerians turned out in their millions and waited patiently for up to several hours to vote. Those who did not vote, did not do so out of choice but rather because of inefficiencies on the part of the Independent National Electorate Commission (“INEC”). Transparency also improved significantly and with the new biometric voting cards voting took place openly with voters watching the process keenly to ensure that the election process was followed strictly. Social media also helped improve transparency with voters posting pictures and videos of any irregularities or delays. Vote counting was done swiftly, commencing as soon as the final vote was cast for that station.
These elections were the tightest and most hotly contested elections that Nigeria has ever seen and though there were a total of 11 presidential candidates, the race was really between the incumbent, President Goodluck Jonathan of the People’s Democratic Party (PDP) and retired military ruler, Muhammadu Buhari of All Progressives Congress (APC). The PDP has won every election since Nigeria transitioned to civilian rule in 1999 but the APC under the leadership of Buhari, emerged as a strong and credible opposition party. Former military ruler Muhammadu Buhari beat Goodluck Jonathan by more than 2.5 million votes, making history as the first opposition leader to remove a sitting president through a democratic process. By and large, the elections went by smoothly and for the most part peacefully. We anticipate some pockets of violence from PDP followers but we expect this to be quickly contained. It was very encouraging that Goodluck Jonathan conceded defeat swiftly and graciously, calling to congratulate his opponent on his election victory. We believe we saw many winners in these elections; the obvious winner Muhammadu Buhari, INEC chairman Prof Jega who managed to conduct the electoral process efficiently and smoothly as well as President Jonathan who conceded his loss graciously.
Going forward, we expect to see no significant policy changes in a new Buhari administration, however, we envision further positive catalysts with the immediate focus on eliminating the threat of Boko Haram and economic reforms including the commitment to clamp down on the endemic corruption that has hindered Nigeria’s growth since independence.