Finally. That might be the reaction of those traders and
investors that like riskier fare as the Global X Nigeria Index
) finally debuted Wednesday, nearly
two years after the firm initially filed plans
for the fund
Interestingly, Global X was not the first ETF sponsor to file
plans for a Nigeria ETF, but the firm can now say it is the first
to have introduced such a product. With the debut of the Global X
Nigeria Index ETF, Africa, a continent believed by some to be the
last great investment frontier, now has three country-specific
The Market Vectors Egypt ETF (NYSE:
) and the iShares MSCI South Africa Index Fund (NYSE:
) are the other two.
Prior to NGE's debut, the only credible ETF options for
Nigeria exposure were the Market Vectors Africa ETF (NYSE:
), which allocates nearly a quarter of its weight to the country,
and the iShares MSCI Frontier 100 Index Fund (NYSE:
). That ETF has an almost 13.8 percent weight to Nigeria.
And with the debut of NGE, investors now have another ETF
getting exposure to the Goldman Sachs Next 11
. Nigeria, which is classified as a frontier market, is part of
That is just one anecdote that investors may find attractive
about NGE and the Nigerian investment thesis at large.
Additionally, Nigeria is the 7th most populous country in the
world and the most populous country in Africa with over 160
million people with nearly two-thirds of that population under
the age of 25,
Global X said citing World Bank data
Nigeria also hauled in $8.9 billion in foreign direct
investment last year, making it Africa's top FDI destination and
the government hopes to increase that total to $16 billion this
year, according to Global X. Predictably, it is Nigeria's energy
industry that is on the receiving end of most foreign investment
in the country.
Not only is Nigeria a member of the Organization of Petroleum
Exporting Countries, it is Africa's largest oil producer. The
country, OPEC's seventh-largest producer, is expected to pump 2.3
million barrels per day this year. Nigerian oil is prized because
most of it is of the light, sweet variety, meaning higher quality
and lower refining costs.
Given that the energy industry is a vital driver of Nigerian
GDP, it is not surprising that NGE allocates more than 24 percent
of its weight to the sector. Only financials at 41.3 percent loom
larger in the new ETF. As experienced emerging and frontier
markets investors know, many of the relevant ETFs for these
markets feature large weights to banks and energy names.
NGE does offer some exposure to potential advancements in
Nigeria's domestic demand story going forward as consumer
discretionary and staples names combine for nearly 25 percent of
the ETF's weight. The ETF is home to 28 stocks and half of the
top-10 holdings are banks.
Still, investors should know what they are getting with
Nigeria and oil simply cannot be left out of the equation. Oil
makes up 15 percent of the country's GDP, two-thirds of the
country's revenue and over 95 per cent of export earnings,
according to Renaissance Capital
Nigeria's oil industry would arguably even more advanced if
not for frequent rebel attacks on oil assets and kidnappings of
industry workers there. Western oil majors such as Exxon Mobil
) and Royal Dutch Shell (NYSE: RDS-A) see vast potential in
Nigeria, but have also been forced to deal with substantial
Other risks include severe corruption, lack of government
stability and military conflict. On the other hand, Nigeria is
moving toward liberalization of its markets. Combine that with
the bountiful oil reserves and favorable demographics, and NGE
could be worth evaluating.
The new ETF charges 0.68 percent year, making it less
expensive than the comparable Egypt fund and the largest China
For more on ETFs, click
(c) 2013 Benzinga.com. Benzinga does not provide investment
advice. All rights reserved.
Profit with More New & Research
. Gain access to a streaming platform with all the information
you need to invest better today.
Click here to start your 14 Day Trial of Benzinga