Nigerian stocks surged the most since March 2010, leading gains among world equity markets, after former military ruler Muhammadu Buhari won a vote marking the first peaceful shift in power since the end of colonial rule in 1960.
The Nigerian Stock Exchange All Share Index rose for a ninth day to extend its longest streak of gains since December 2012. The West African nation’s $500 million of Eurobonds due July 2023 advanced for the 11th day, pushing the yield down to the lowest since Dec. 8, as President Goodluck Jonathan conceded defeat, reducing the threat of post-election violence that marred previous votes.
“The political risk has certainly decreased,” Thabo Ncalo, a money manager at Stanlib Asset Management Ltd., which oversees about $45 billion and has been adding to its Nigerian holdings, said by phone from Johannesburg. “It bodes well for investing in Nigeria. It boosts the case for coming back into the country.”
Jonathan sent his “best wishes” to Buhari after the vote, bolstering investor confidence as the country contends with a six-year war against the Islamist militant group Boko Haram. Buhari also faces the task of restoring an economy that’s reeling from a 50 percent drop in the price of oil, its main export, since June.
Nigeria’s all-share index jumped 8.3 percent, the most among 93 global measures tracked by Bloomberg, to close at 34,388.46, the highest since Dec. 31. The gauge has gained 18 percent since the start of a nine-day rally, also the world’s largest advance over the period. At the end of February, it was the global laggard for the year.
Almost 22 shares gained for every one that fell, paring losses for 2015 to 0.8 percent. Dangote Cement Plc, Lafarge Africa Plc, UAC of Nigeria Plc, which has interests spanning food to real estate, and Forte Oil Plc, all rose more than 10 percent on Wednesday.
Nigerian equities traded at about 9.4 times estimated 12-month earnings, compared with a multiple of 10.1 for the MSCI Frontier Markets Index.
“The Nigerian equity market is cheap and part of this cheapness is because the risk premium is high,” Ayodele Salami, the chief investment officer at Duet Asset Management Ltd. in London, said by phone on Tuesday.
A retired general who lost three previous elections, Buhari pledged on the campaign trail to clamp down on corruption, boost average annual growth to 10 percent and create at least 1 million jobs a year. He won 52.4 percent of votes cast in all 36 states and the Federal Capital Territory in Africa’s biggest oil producer, according to tallies by the electoral authorities.
Yields on the nation’s Eurobonds declined 22 basis points to 5.98 percent. Rates on the notes on Tuesday dropped below those of Kenya’s $2 billion of debt securities due June 2014 for the first time since Dec. 11, according to Bloomberg indexes.
Nigerian dollar debt returned 3.3 percent in March, the most in Africa, the data show.
“The opportunity for positive change with genuinely new leadership is enormous,” Samuel Vecht, who oversees $2.7 billion across five emerging- and frontier-market funds, said in e-mailed comments from London. “Within Nigeria we think the banking sector has tremendous long-term potential and trades at inexpensive relative and absolute valuations.”
With oil providing two-thirds of government revenue and 90 percent of foreign income, the commodity’s decline threatens the economy, with the International Monetary Fund forecasting growth will slow to 4.8 percent this year, about half the average of the past 15 years.
The drop in crude has weighed on the currency, which has lost 18 percent over the past six months. The naira strengthened 0.4 percent to 198.50 per dollar, its first advance in three days. Gains in the currency and trading volumes on Wednesday cannot be ascribed as a “Buhari bounce” as liquidity in the market increased following regular dollar sales by oil companies, Dapo Olagunju, group treasurer at Lagos-based Access Bank Plc, said by phone.
Buhari’s victory may lead militia in the oil-rich Niger Delta states to take up arms, a threat they issued before Jonathan lost, Philipp Chladek, an analyst for Bloomberg Intelligence, said. About 80 percent of Nigeria’s oil production originates from the Niger Delta, he said.
“There are potential risks of some resurgence in militant activity in the region, which could significantly affect production from onshore fields,” Dolapo Oni, head Ecobank Transnational Inc.’s energy research unit in Lagos, said in an e-mailed response to questions. “This is especially important for indigenous companies in this region, as it could affect their operations and have a negative affect on local banks that have funded them.”