Nigeria ETF spikes, but remains near record lows

The largest exchange-traded fund to track the Nigerian equity market spiked on Wednesday, posting its biggest one-day gain in about a year, although it continues to trade near all-time lows. The Global X MSCI Nigeria ETF NGE, +4.51% jumped 4.7% to $15.55, its biggest one day rise since May 16, 2016. Nearly 48,000 shares exchanged hands, above its 30-day average trading volume of almost 40,200. The move was likely related to the 3.4% rally in crude-oil prices on Wednesday, which comes at a time when Africa’s top economy is looking to increase oil production. Currently the country is exempt from the six-month production limits set by the Organization of the Petroleum Exporting Countries and other major crude producers starting in January. (OPEC and other producers are considering extending the output cuts.)


 The largest component of the ETF—Nigerians Breweries PLC, which accounts for nearly a fifth of the fund’s portfolio—rose 3% on Wednesday. The fund has been in a pronounced downturn of late. On Friday, it plummeted more than 11%, a selloff that took it to its latest in a series of record lows. Even with the rally on Wednesday it remains down 8.7% for 2017. Recent uncertainty came after Muhammadu Buhari, the 74-year-old retired general who came to power in 2015, confirmed that he had traveled to the United Kingdom for treatment for an illness that hasn’t been publicly disclosed.

 Adding to the bearish tone over the region, the International Monetary Fund on Tuesday warned of a long-term slowdown in sub-Saharan Africa, with Nigerian GDP seen growing 0.8% in 2017.

 The broader group of sub-Saharan countries is expected to post growth of 2.6% this year, up from 1.4% in 2016. The ETF has been a weak performer ever since it was launched in 2013, falling more than 30% in each of the years it has traded.

 It has lost more than three-quarters of its value since its debut and currently has about $34.6 million in assets. Despite that weakness, the ETF has seen positive flows lately. About $700,000 moved into the fund over the past day, according to FactSet, and it has seen year-to-date inflows of nearly $12.5 million—an amount that accounts for more than a third of its assets. Over the past 12 months, $27.9 million has moved into the fund, although it is difficult to tell whether such activity reflects bullish bets on the part of investors or short sellers who are positioning for additional declines.