Emerging Crowd: Nigeria tops frontier markets chart

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Nigeria is the world’s most attractive frontier market, according to a new study by the investment platform Emerging Crowd.

The research identified the five frontier markets with the greatest potential for British investors – and Africa’s largest economy came out on top. With a population of 174 million and a GDP that’s forecast to rise by 5.5% in 2015, Nigeria is Africa’s most populous country and the continent’s undisputed economic powerhouse.

African countries dominated the rankings, with the continent’s other star performers Kenya and Ghana taking the second and third spots. The Philippines and Vietnam complete the top five, which are ranked in the following table:

Population
(million)
2014 GDP
estimate
(£ billion)
SME sector*
(£ billion)
SME as % of GDP SME as % of all businesses 2015 forecast GDP growth
Nigeria 174 369 173.5 47% 96% 5.5%
Kenya 44 39 12.9 33% 98% 6.4%
Ghana 26 34 16.7 49% 90% 3.9%
Philippines 98 192 57.6 30% 99% 6.6%
Vietnam 90 120 48.0 40% 97% 6.2%

Source: World Bank; Philstar; Ghana Web; Kenya Institute of Management; Business-in-asia.com

*Note: SME sector sizes based on 2013 GDP contribution

Will Tindall, co-founder of Emerging Crowd and author of the report, commented: “Nigeria is in a unique sweet spot for investors right now. This month’s smooth transition of power from one democratically elected president to another is a potent endorsement of its political stability, and the falling oil price has spurred its vast economy to diversify rapidly.

“Thousands of entrepreneurial young companies are springing up – and with such a huge and untapped market on their doorstep, the best have extraordinary growth potential. With the Nigerian currency now 14% cheaper against the Pound than it was a year ago, the country’s stocks represent exceptional value to investors who are keen to broaden their horizons into frontier markets.”

The second-placed country on the list is Kenya, which has seen a string of successful technology companies emerge from Africa’s first tech incubator, in an area of Nairobi that has inevitably been dubbed “silicon savannah”. Kenya’s GDP is forecast to grow by 6.4% in 2015 – more than double the rate of the UK economy.

A recent survey by Deloitte and Touche found Kenya to be the most popular market for private equity investment in Africa, underlining the nation’s maturity as an investment destination. The survey cited Kenya’s growth prospects, its open market policies, and its well-developed financial sector as key factors in its appeal.

Will Tindall added: “All of the countries to make the top five have a thriving SME sector like the UK’s, together with strong GDP growth and favourable demographics. Crucially, they all have a strong legal framework for investor protection.

“Frontier markets can offer investors significant growth and income as part of a diversified investment portfolio. For decades the only practical way for investors who reside outside these markets to access them was via a fund. Emerging Crowd was set up to allow investors to invest directly in a carefully curated selection of companies in the world’s most exciting emerging and frontier markets.”

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