Rahma Ahmed
By Ahmed Rahma
As a result of the shortage of Dollar in Nigeria, which is putting pressure on the Naira, foreign portfolio investors have devised another strategy to pull their funds out of the country through the capital market.
According to a report by Bloomberg, this new means is by buying gold Exchange-Traded Funds (ETF) and to trade in South Africa, Nigeria’s main economic rival on the African continent.
The ETFs have been extolled for everything, from democratizing asset investment to making better market liquidity, but that this, savvy investors in Africa have hit on a less obvious benefit, the international news platform said.
The report revealed that portfolio managers are buying the Newgold Issuer Limited ETF in Lagos, using the Naira and transferring holdings to the fund’s primary listing in South Africa and sell for rands.
“As a trade, it’s an almost certain money-loser. But activity in the ETF has been gradually increasing as investors decide it’s worth paying up to get assets out of Nigeria and into other more liquid markets,” the report stated.
An equity analyst at Stanbic IBTC Stockbrokers, Akinbamidele Akintola, also disclosed that there is a new discovery by portfolio investors to pull funds out of Nigeria’s equities market to the Johannesburg Stock Exchange.
“The ETF has been listed on the NSE for a few years and frankly, nobody cared to look at it until June, The market discovered that there is fungibility play here to get money out of Nigeria to the Johannesburg Stock Exchange,” Akintola wrote.
Nigeria, the largest economy in Africa, has been wrestling with the shortage of the dollar shortly after the coronavirus outbreak and the fall in the price of oil, a major source of foreign exchange earnings for the country.
Greenbacks are generally obtained in the country’s investors and exporters window, but apex bank stopped selling dollars in March and only resumed limited sales three months ago. Turnover now averages about $150 million, down from around $300 million to $400 million at the start of the year.
