Fleeing Oil Companies A Bad Omen For Nigeria

August 27, 2014

For a country that needs more investment, not less, the exits are troublesome.

NGE_TR

Chart courtesy of StockCharts.com

Nigeria is going backward. Instead of increasing investment in Nigeria, foreign companies are headed for the exits.

Often touted as one of Africa's brightest prospects, Nigeria has attracted much interest and investment from foreign companies over recent years, but things are turning sour. As the Financial Times reports, a consortium of foreign oil companies is close to finalizing the sale of onshore oil resources in Nigeria. That's the opposite of where things should be headed for a country with a relatively young population and vast potential.

The companies cited "theft and sabotage" as the impetus for the rushed exit. That's particularly troubling considering that, more than anything, frontier countries like Nigeria need to show stability and rule of law to attract the foreign investment that spurs development.

The Global X MSCI Nigeria ETF (NGE) tracks a market-cap-weighted index of 25 companies that are headquartered or listed in Nigeria and carry out the majority of their operations there. NGE is down more than 6 percent over the past month and a half but, should stability and order return to the country, NGE could be a useful investment vehicle for capturing growth.

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