Should you be worried about geopolitical risks?


Thursday, September 11, 2014 6.08 PM / Sriram Sekhar for TheAnalyst


Overview of Nigerian economy:

Nigeria is among the largest and sophisticated economies in Africa, and has overtaken South Africa in terms of economic growth, taking clue from recent rebased GDP figures. Given all the significant growth opportunities of the Nigerian economy; rising security issues in and around the country has led many investors to worry about the business confidence levels.


Standard & Poor's ranks the country's credit rating with a negative outlook due to the high institutional risk, outbreak of violence, oil theft, armed robberies, terrorism, pipeline shutdown, etc. Approximately 100,000 bpd of oil is stolen in Nigeria every year and sold in Latin America and Asia through black market. The emergence of Boko Haram and its spread in the North east part of Nigeria remains alarming for the country as whole.


This seems to have had adverse impact on market share of some consumer goods firms. their earnings and bottom-line took serious hit as reported in the recent earnings seasons.


Should you be worried about geopolitical risks? - Not too much:

Even though high security issues and geopolitical risk are mounting in the country, investors still find Nigeria an attractive investment destination. The Nigerian government has continuously taken reformatory efforts to eliminate these issues- we remained optimistic that the current or incoming government would sincerely arrest the geopolitical unrest and strengthen the security infrastructures and institutions to give way to better business confidence in the country.


Nigerian economy holds positive growth in future:

In terms of economic development, Nigeria has recorded a remarkable growth, currently it is the 26th largest economy in the world with a GDP of about $260 billion. Nigeria is emerging as an investment hub; as the business confidence and financial returns are taking impressive and attractive shape, opportunity seekers, foreign and domestic investors are finding the Nigerian financial markets to be profitable.


Nigerian economy remains the host of FDI in the continent as the country is among the top 20 global destinations for FDI in the world. Over the last three years, over USD 20 billion in the form of FDI was pumped into the country, as a result of which Nigeria is the second largest FDI recipient in the African continent.


After the global financial crisis, the Nigerian stock market has recovered moderately, marking its place among the 10 best performing stock markets in the world in the recent years. With its various financial industry reforms and economic reforms we expect the long-term growth perspective of Nigeria to remain positive in the mid - long run.


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