Nigerian markets and country-specific exchange traded fund are surging after the frontier country's central bank made a policy one-eighty on exchange rates.
The Global X Nigeria Index ETF (NYSArca: NGE) added another 1.2% Friday after surging 9.3% over the past week and jumping above its long-term, 200-day simple moving average. NGE is up 25.1% over the past three months and 4.5% higher year-to-date.
Nigerian equities strengthened over the past few sessions after the central bank on Tuesday said it would adopt a flexible exchange rate policy, ending currency controls that fettered the equity market, Reuters reported.
The Nigerian naira currency was overvalued due to a pegged regime, which weighed on growth and investment. Foreign investors saw a devaluation as inevitable and previously kept to the sidelines or have been selling shares.
Lanre Buluro, an analyst with broker Primera Africa Securities Ltd., said that most foreigners have waited until the central bank to make the changes and loosen capital controls before jumping into the market.
Central Bank Governor Godwin Emefiele said details of a new policy were still being worked out and would be released "in the coming days," Bloomberg reported.
The frontier economy has been weighed down by the plunge in world crude oil prices, which affect around 70% of the national income.
Gross domestic product shrunk in the first quarter for the first time since 2004 as manufacturers struggled to purchase imports of raw materials and equipment.
Despite the central bank relief, Emefiele warned that the nation is now heading into an "imminent" recession, Bloomberg reported. The Central Bank Governor attributed his pessimistic outlook to the delayed 2016 budget after the withdrawal of an earlier version to make corrections in response to the slump in crude oil prices and internal squabbling over ministry allocations.
Global X Nigeria Index ETF
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