T. Rowe Price: Nigerian Equities Still Has Growth Prospects Despite 64% Global Rally

South African bank looks to expand presence in Nigeria

Emmanuel Addeh in Abuja

Despite a 64 per cent year-to-date rally that has made Nigeria’s equities market the second-best performing stock market globally after South Korea, global investment firm T. Rowe Price has said the Nigerian market still has room for further growth.

Johannes Loefstrand, who manages about $310 million in frontier-market assets at T. Rowe Price, said structural reforms undertaken by the federal government had improved the investment outlook and created opportunities for active stock pickers.

Speaking on Bloomberg TV’s Next Africa, Loefstrand said he was “excited” about Nigeria’s prospects, pointing to the removal of fuel subsidy and liberalisation of the foreign exchange market as key policy shifts that had changed investor sentiment.

Nigeria’s stock market has recorded one of the strongest performances globally this year, with the Nigerian Exchange (NGX) benefiting from improved macroeconomic conditions, stronger corporate earnings and increased participation by domestic investors.

The rally has, however, occurred against a backdrop of relatively limited foreign participation, with international investors facing additional market frictions, including the transition to a T+1 settlement cycle and uncertainty surrounding Nigeria’s status in global equity indices.

T+1 settlement means that equity transactions are settled one business day after they are executed, requiring investors to have funds available more quickly to complete trades.

Loefstrand said T. Rowe Price was focusing on individual companies and sectors where it saw sustainable earnings potential rather than simply following the broader market rally.

“Cement is one of the many industries we’re looking at and if we see a potential to participate there,” he said.

T. Rowe Price’s Frontier Markets Equity Fund already has exposure to some of Nigeria’s biggest listed companies, including Guaranty Trust Holding Company Plc and Dangote Cement Plc, according to its June 30 portfolio.

Loefstrand said Nigeria’s large population, oil-producing status and ongoing infrastructure requirements provided a basis for opportunities across several sectors.

He noted that higher crude oil prices, partly driven by geopolitical tensions and supply disruptions linked to the Middle East, had also provided support for Nigeria’s corporate earnings outlook.

The investment manager, however, cautioned that the broader macroeconomic and sovereign debt environment remained a key consideration for investors in African markets.

According to estimates by the African Export-Import Bank, Africa’s aggregate debt stood at about $1.3 trillion in 2025, with the debt burden expected to continue rising through 2029, although at a slower pace.

Loefstrand said countries demonstrating a willingness to address fiscal and economic weaknesses were more likely to attract long-term investment.

“If a country is willing to address their problems and they’re on an IMF program, it makes it a lot easier for us to have confidence,” he said.

He also identified Kenya as another frontier market with longer-term potential, despite lingering concerns over its economic outlook.

“There’s still some concerns about Kenya, but longer term the outlook does look rosier,” he said.

Meanwhile, Nigeria’s improving investment narrative is also attracting renewed interest from financial institutions seeking to deepen their presence in Africa’s largest economy.

South Africa’s third-largest lender, Absa Group, is exploring the conversion of its representative office in Nigeria into a merchant bank as part of a strategy to diversify its revenue base beyond its largest African markets.

Absa Chief Executive Officer, Kenny Fihla, said the bank was examining the possibility of obtaining a merchant banking licence that would allow it to expand its activities in Nigeria.

“We’ve got a rep office in Nigeria, which we are exploring the possibilities of converting into a merchant banking license,” Fihla said in an interview with Bloomberg TV.

A merchant banking licence would enable Absa to take corporate deposits and provide services including lending, investment banking and project finance, potentially placing it in direct competition with major South African banks already active in Nigeria as well as leading domestic lenders.

Absa’s move forms part of a wider strategy to reduce its dependence on South Africa, Kenya and Ghana, which accounted for more than 80 per cent of the group’s profit in the six months to June.

“The dependence on two or three big markets is fine if you’ve got tailwinds, but as soon as you experience some headwinds, you are vulnerable to massive shocks. Which is why then the primary thrust of our strategy is to diversify our revenue streams, both in terms of geographies, in terms of business lines, but also in terms of client segments,” Fihla added.

The renewed interest by global asset managers and international financial institutions comes as Nigeria seeks to consolidate the gains from its economic reforms and attract more long-term foreign capital.