Foreign portfolio investors have created another strategy to pull their funds out of Nigeria through the capital market.
The investors are leaving the market by buying gold Exchange-Traded Funds (ETF) and to trade in South Africa, Nigeria’s main economic rival on the African continent.
Techeconomy.ng gathered that their reasons are dying to the shortage of dollar in Nigeria, which is putting pressure on the local currency, the naira.
Although, it is no more a story that Nigeria, the largest economy in Africa, has been wrestling with the shortage of the dollar shortly after the COVID-19 outbreak and the fall in the price of oil, a major source of foreign exchange earnings for the country.
A report by Bloomberg revealed that portfolio managers are buying the Newgold Issuer Limited ETF in Lagos state.
They are using the naira and transferring holdings to the fund’s primary listing in South Africa and sell for rands.
According to the report, “As a trade, it’s an almost certain money-loser. But activity in the ETF has been gradually increasing as investors decide it’s worth paying up to get assets out of Nigeria and into other more liquid markets.”
An equity analyst at Stanbic IBTC Stockbrokers, Akinbamidele Akintola, was said to have spoken about the new discovery by portfolio investors to pull funds out of Nigeria’s equities market to the Johannesburg Stock Exchange.
Akintola said: “The ETF has been listed on the NSE for a few years and frankly, nobody cared to look at it until June, The market discovered that there is fungibility play here to get money out of Nigeria to the Johannesburg Stock Exchange.”