Outlook on Nigeria's investment landscape

With Nigeria's President, Muhammadu Buhari, in Saudi Arabia for an investment conference organized by the Future Investment Initiative Institute, the focus is on the investment landscape in Nigeria as the year draws to a close. Pabina Yinkere, Chief Investment Officer at Sigma Pensions, discussed the outlook for 2021 on CNBC Africa. Yinkere described the year as having two distinct halves - a challenging first half due to the lingering impact of the COVID-19 pandemic, followed by a stronger recovery in the second half. The initial low GDP growth shifted to a positive trajectory by the second quarter, reflecting a global trend of economic resurgence. The financial markets also exhibited increased stability and provided better returns, signalling a positive market outlook moving forward. Yinkere highlighted the impact of changing interest rates on investment portfolios, noting a shift from cash holdings to more attractive investment opportunities as rates began to rise. Equities became more appealing in the face of low fixed income returns, leading to a notable rally in the market. Despite a less robust rally compared to 2020, the market resilience was supported by various factors, including corporate performance amid the post-COVID recovery. The exposure to banks within pension fund portfolios, which accounts for approximately 17% of assets under management (AUM), reflected a strategic positioning for potential interest rate increases in the coming year. Yinkere emphasized the safety and strength of the banking sector, reassuring viewers of the prudence in maintaining significant bank investments. The rally in oil prices, nearing $90 a barrel, and the petroleum industry bill's passage opened up new opportunities in the oil and gas sectors. Yinkere anticipated positive prospects in oil and oil services-related industries, emphasizing the need for a more diversified representation across the value chain on the Nigerian stock market. While downstream players currently dominate the sector, Yinkere expressed the importance of attracting more upstream and midstream players to enhance market depth and breadth. The alignment of energy transition plans and the national oil company's transformation further underscored the promising outlook for investments in the sector. Anticipating a period of growth and development spurred by the petroleum industry bill and government initiatives, Yinkere remained optimistic about the future trajectory of Nigeria's investment landscape. With a focus on leveraging emerging opportunities and strengthening market fundamentals, the investment community stands poised for potential growth and advancement in the coming year.