Nigeria NGE ETF

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NGE has reached an interesting price point, prior to its imminent liquidation. Its Fund Manager has liquidated almost all its constituent holdings, and the resulting local currency cash Naira is to be converted sometime in the next 5 weeks into USD, for distribution to shareholders at NAV. NAV should range between $10-$11, if NGN:USD trades between 800-720 in the next 5 weeks.

That's an average 20% return in one month or so, should I buy around $8.80 last market close. Naira has been stabilizing since being unpegged from USD officially in June 2023. NGE has had a chequered career, and Nigeria has had capital controls, but the new guy Tinubu has initiated decisive reforms, including relaxing capital controls.

In any case, the current 20% discount to market close $8.8 should vanish as we near distribution date (expected 2 oct 2023). Looks like a relatively risk-free arbitrage opportunity to me.

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Nigerian election tribunal upholds Tinubu's presidential win
https://www.reuters.com/world/africa...nt-2023-09-06/

Uncertainty removed. This should help Naira lift up vs USD, and therefore help NGE find a floor sooner. Morgan Stanley stated it liked Tinubu reforms and the pace at which he is trying to turn the Nigerian economy around

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Nigeria mulls G20 bloc membership.
https://www.reuters.com/world/africa/nigeria-mulls-g20-bloc-membership-2023-09-03/
Tinubu attending G20 summit in India to try to promote foreign investment in Nigeria and mobilize global capital to develop infrastructure. South Africa is currently the only African member of the group of the world's 20 most industrialised nations.

Tinubu has already embarked on the boldest reforms in decades, which have been welcomed by investors.

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G20 welcomes African Union as permanent member at Delhi summit
https://www.cnbc.com/2023/09/09/g20-...-union-au.html

Great for Africa (and Nigeria) trade and economic stability, and another step in the direction of a more stable multi-polar world.

Nigeria joined the huge Africa Continental Free Trade Agreement (AfCFTA) over four years ago, when it was formed to boost manufacturing across 55 members of the African Union (AU) - together in a single market of 1.2 billion people - by removing trade barriers such as tariffs across Africa, but Buhari then closed borders to end smuggling - which increased inflation. Nigerian non-oil exports peaked at 1 Trillion Naira (~ $2.5bn) in 2019, and never recovered post Buhari's border closure.

Now, with Nigeria leading ECOWAS and Tinubu speeding up reforms and re-engaging on regional security and fellowship, Africa and Nigeria should benefit again. Manufacturing is 10% of AU's combined GDP of ~$3.5 trillion, but Africa also has 30% of the world’s mineral reserves, 12% of the world’s oil, 8% of the world’s natural gas reserves, 40% of the world’s gold, and 90% of its chromium and platinum – both valuable metals. 63% of world’s cobalt production comes from DRC. DRC and Rwanda are the world’s largest producers of tantalum (50% together), etc.

If Tinubu can also secure some bilateral agreements or FTAs out of G20 in 2023, Nigerian Naira should start to take-off. Meaning the NGE NTA should rise, and the pay-off at the imminent NTA distribution should be larger. The arbitrage opportunity just keeps getting better and better.

[Valuegrowth]

Few developing markets which include Nigerian market are outperforming other markets. For me the biggest risk in investing in foreign markets is currency risk. Another risk is default risk. However, few specialized funds have done well by investing in those countries. I still get monthly newsletter from one of the funds based in Cayman Island. I learn something from it. Their record is amazing.

https://tradingeconomics.com/nigeria/stock-market

The NSE-All Share increased 16892 points or 32.96% since the beginning of 2023, according to trading on a contract for difference (CFD) that tracks this benchmark index from Nigeria.

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For people who are looking to get AT LEAST SOME ex-US/ China/India/Europe exposure for various reasons, Nigeria is Africa's giant - its #1 economy, #1 oil producer and #1 populous nation. Now #8 in Global Population (population is expected to double by 2050, making it World #4 populous country), 51st in Global Market Capitalizations ($40 Billion), 25th in Global GDPs ($500 Billion), it has strong demographics as more than 60% of Nigerians are under 25 yrs old.

While western media generally reports only problems in Frontier Markets, Nigeria is undergoing rapid technological and financial innovation, acceptance and penetration. I am only sad to see that NGE will soon payout NAV and cease to exist... given that it was finally beginning to rise again like a phoenix, after Buhari & Co. all but incinerated the economy and the country's international goodwill.

Still, it should pay a handsome distribution to all buying below $10 now.

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29 March 2024 NGE liquidation = NAV distributed to shareholders, and circa 15% discount to NAV currently available in market is likely to vanish slowly

As of the close of regular trading on the NYSE Arca (the “NYSE”) on March 25, 2024 (“Closing Date”), the shares of the Fund will cease trading on the NYSE and the Fund will be closed to purchases by investors.
Ref: SUPPLEMENT DATED SEPTEMBER 19, 2023
https://www.globalxetfs.com/prospect...ulatory/?id=67

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Nigeria produces most of Africa’s petroleum (25%), and crude is about to flirt with $100 a barrel again. A JPMorgan Analyst Sees Energy Supercycle With Oil As High As $150. https://oilprice.com/Latest-Energy-N...gh-As-150.html

Crude contributes 5% to Nigeria GDP (Oil production capacity circa 1.50 million barrels a day, but was producing less than 1mbpd in Apr 23 due to security issues etc.), but gets 90% of Nigeria's FX earnings and 50% of Govt revenue. A higher Oil price and imminent start of production at the new Dangote refinery will see NGN:USD rising and black market rates converging towards official exchange rates, if Tinubu can sort out the security issues a bit.

Looks like green shoots for Nigeria, and NGE holders to me, despite all the loud and prolific chatter about possible 1000 NGN:USD in black markets soon

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Ok, so 1000 NGN:USD has come to pass in the black markets.
And, the FX reserves have bled some, as expected, post capital control reforms.
And, the share dumping on the NGE liquidation postponement from 2 October 23 to 29 March 24 is also (mostly) done.

Where to from here? I think the 15%+ discount on NAV distribution still on offer on NGE is still way better than what NZX 50 can achieve in the next 6 months. So, NGE still remains attractive...

[Valuegrowth]

https://nairametrics.com/2023/10/02/...th-29-52-gain/