The promise of Africa’s biggest economy has turned to peril.
Companies drawn to Nigeria by the prospect of a population bigger than Germany and Turkey’s combined are retreating; those staying have publicly criticized the president, a military strongman in the 1980s who came back to power via an election last year; and foreign investors are pulling their money out.
The corporate tribulations that began with a slide in oil prices and accelerated after the imposition of capital controls are also entangled in a global emerging-market slump. In propping up the naira in a futile bid to contain inflation, officials have jacked up pressure on an economy running out of cash, deepening a black market in currency trading and causing shortages of imported goods from fuel to milk. U.S. officials said they will press their Nigerian counterparts to change tack during talks in Washington this week.
“Our clients, Fortune 500 and other multinationals, are all quite concerned by the state Nigeria finds itself in,” said Alexa Lion, a senior analyst at Washington-based Frontier Strategy Group, which advises companies looking at developing nations. “Sentiment has worsened. There’s a lot of anxiety.”
After four years trying to gain traction, Truworths International Ltd., a South African clothing retailer, last month gave up. It closed its last two outlets in Nigeria, in the southeastern cities of Enugu and Warri. Willing to tolerate dilapidated infrastructure, complicated red tape and expensive rent, the company said the import and foreign-exchange restrictions caused it to throw in the towel.
“We were happy to lose money for a few years while we developed the business and opened new stores,” Chief Executive Officer Michael Mark said in an interview. “The straw that broke the camel’s back was not being able to get stock into Nigeria. You can’t have a clothes shop with no clothes. With all the other things, it just wasn’t worth it. It was impossible to do business.”
Nigeria’s appeal has faded as the price of oil, source of 90 percent of export earnings, has crashed. Growth slumped to 2.8 percent last year, the slowest since 1999, and will decelerate to 2 percent in 2016, according to Morgan Stanley. In dollar terms, the economy in 2019 will still be 17 percent smaller than its 2014 peak of $542 billion. Only two years ago, McKinsey & Co. said Nigeria had the potential to grow 7.1 percent annually until 2030 and build a $1.6 trillion economy.
As Nigeria lags, other countries in sub-Saharan Africa have gotten more appealing. Last month, Nigeria fell from first to fourth, behind Ivory Coast, Kenya and Tanzania, in a ranking of business prospects by the research unit of Nielsen Holdings Plc.
Portfolio investors including Aberdeen Asset Management Plc and Ashmore Group Plc, which together oversee about $450 billion of assets, have retreated from Nigerian markets. The main stock index is down 10 percent this year, while the MSCI Frontier Markets Index has lost 2.8 percent. Nigeria’s local-currency bonds are the only ones among 31 emerging markets tracked by Bloomberg to have generated aloss this year. Foreign direct investment this year is set to be the lowest since the 2008-09 global financial crisis, according to data from the central bank.
For now, President Muhammadu Buhari and Central Bank Governor Godwin Emefiele say they aren’t budging from their strong-naira policy. While both acknowledge that businesses are struggling to source enough dollars, Buhari says that a devaluation and easing of capital controls would be akin to “murdering” the naira and send prices up. That’s already happening as manufacturers struggle to buy foreign inputs, with inflation accelerating to a three-year high of 11.4 percent in February.
Markets are betting Nigeria will be forced to follow oil exporters from Russia to Kazakhstan and Mexico and let the currency weaken. While the naira has been all but pegged at 197-199 per dollar since March 2015, forward prices suggest it will drop 29 percent to 280 in a year. The black market rate has weakened to 320.
Bruno Witvoet, the Africa President of Unilever, whose Nigerian subsidiary has seen its shares plunge 31 percent since Buhari came to power, said it would be “very insane” for the country to persist with the currency policies. Nestle SA says its local unit, which has fallen 18 percent in that period, has had to widen the number of banks it uses so that it can access enough foreign exchange.
Not all companies are gloomy. In January, Coca-Cola Co. agreed to pay about $240 million for a 40 percent stake in Chi Ltd., which is based in Lagos, and makes fruit juice and dairy products. Boston Consulting Group this month opened its first office in Nigeria.
“It’s an immense market,” said Geoffrey White, CEO for Africa at Kuwait-based Agility Public Warehousing Co K.S.C., which plans to spend hundreds of millions of dollars building four warehouse and logistics parks in Lagos and the capital Abuja by 2020. “You can’t really have an African policy without having Nigeria high up on the list.”
For Frontier Strategy Group’s Lion, Nigeria is too important for foreign companies to exit en masse.
“But a lot will depend on what happens with the currency,” she said. “For now, the opportunity cost of not being there is too high. That could change if the currency situations worsens. It’s definitely a pivotal time.”
REVEALED: Millionaire Investors’ Biggest Mistakes in a New Survey
Relying on guidance from historical returns is the number one investment mistake made by millionaires, reveals a new global survey.
The survey was carried out by deVere Group, one of the world’s largest independent financial advisory and fintech organisations, and queried 752 investors with investable assets of more than £1m (or the equivalent) in the UK, Europe, Asia, Africa, the Middle East, Australasia, Latin America and North America about their biggest errors whilst investing before they became clients.
The top cited mistake (38%) was reliance on historical returns, the second (35%) was not having sought advice, and the third (21%) was lack of diversification. A collection of other mistakes and ‘do not knows’ made-up the remaining 6%.
deVere CEO and founder, Nigel Green, says: “It’s interesting to see that for the first time in our surveys of this kind that the number one investment mistake high-net-worth individuals have made is, they say, reliance on guidance from historical returns.
“To me, this suggests that wealthy investors are paying attention to how the world has changed dramatically this year and, therefore, investment strategies need to adapt and evolve too in order to reflect the new era we’re living in.
“With fundamental shifts in economies and the markets, the often-quoted industry phrase ‘past performance is not a reliable indicator of future performance’ has perhaps never rung more true than it does today.”
He continues: “It’s encouraging that seeking advice is deemed fundamental to success by millionaires as it shows that DIY investing and not having a regularly reviewed plan is, typically, a path full of costly pitfalls.”
Mr Green goes on to add: “The lack of diversification was in some ways bound to make the top three. Why? Because it is universally regarded as an investor’s best tool to mitigate risks and capitalise on opportunities that arise.”
The fact the top three mistakes are all fairly close in percentage terms says to the deVere boss, “that, in fact, they all link in pretty tight to number two – that’s to say, having a robust, considered and consistently reviewed strategy for your personal finances.”
Mr Green concludes: “To some, this could appear as if investing your hard-earned money is dangerous.
“Yet nothing could be further from the truth – not investing is likely to be more dangerous to your wealth over the longer-term.
“This is shown by the fact that most of the world’s wealthiest people are themselves committed investors.”
Investors Turn to Digital Health Startups With $10 Billion Funding in 2020
Global Investors Dump $10 Billion on Digital Health Startups in 2020
Data presented by Buy Shares shows that digital health startups funding has hit $9.9 billion in 2020. The highest funding was recorded in Q3 at $4.6 billion.
The surge in funding is expected to continue
Between Q1 and Q3, the funding grew by 58.62%. During Q1, the funding was $2.9 billion. The figure slightly dropped during Q2 to $2.4 billion.
The Buy Shares research also overviewed the five largest digital health funding deals as of Q3 2020. Bright Health was the biggest deal at $500 million with funding from Blackstone, Tiger Global Management among others. XtalPi recorded the second-highest funding at $319 million.
In the third spot, there is RecursionPharmaceuticals with cumulative funding of $239 million while Ro is fourth at $200 million. Out of the overviewed top funding, Ground Rounds is ranked fifth at $175 million.
The research highlights the value of digital health to investors. According to the research report:
“To investors, the digital health sector offers a promise of both good financial returns and key positioning by supporting companies that build solutions to address clinical and operational hurdles. The sector offers a unique value to companies as they hold integral direct access to both providers and patients.”
The surge in funding is expected to continue and shatter various records in 2020.
World’s Five Largest Asset Management Companies Hold $22.5trn in Assets, More than US GDP
Global Five Biggest Asset Management Companies Hold $22.5trn in Assets, More than US GDP
Institutions and individuals who invest money usually do so with the asset manager’s help, a company that manages their investments and makes a profit for both sides. These firms make well-timed investment decisions on behalf of their clients to grow their portfolio and finances.
According to data presented by Stock Apps, the world’s five largest asset management companies hold $22.5trn in assets, more than the GDP of the United States. With more than $7.3trn in assets under management or one-third of that value, BlackRock represents the leading asset manager globally.
Total Assets Under Management of BlackRock Surged 57% in Five Years
Asset management companies work with several investors, which enables them to reduce the risk, diversify their clients’ portfolios, and provide access to higher-value options with better capital appreciation prospects. In many cases, they make money by charging fees based on the number of assets they manage, although some companies charge flat fees. These firms usually also provide other services than asset management, which generates only a part of their revenue.
The world’s largest asset manager, BlackRock, has become one of the leading players on the financial market over the last 25 years. It serves individual investors, companies, governments, and foundations through 70 offices all around the world. BlackRock also tops the list of largest Exchange Traded Fund (ETF) providers in the United States and has played a huge role in advising the US government during the financial crisis.
In 2015, the total value of assets under BlackRock’s management amounted to $4.6trn, revealed the company’s annual report. During the last five years, this figure surged by 57% to $7.3trn in 2020. Besides leading in the value of managed assets, the New York-based financial giant also witnessed a steady market cap growth in 2020. In September, the total value of BlackRock stocks hit $83.6bn, a 22% jump year-over-year.
With $5.7trn in total assets under management, the Vanguard Group ranked as the second-largest asset manager globally. The US financial company, with 20 locations worldwide and 17,600 employees, is also the second-largest provider of exchange traded funds and the largest provider of mutual funds in the world.
Eight of the top 10 Asset Management Firms are US Companies
UBS Group represents the third-largest asset manager globally, with more than $3.5trn in assets under management. The Swiss financial corporation and the country’s largest bank announced a net profit of $1.23 billion for the second quarter of 2020, an 11% drop year-over-year mostly caused by the continued credit losses amid the coronavirus crisis.
However, higher trading activity continued to support the bank’s earnings between March and June. The Group’s quarterly earnings also revealed an operating income of $7.4bn, compared to $7.5bn a year ago. Statistics show the Swiss lender lost $1.6bn in market capitalization in 2020, with the total value of stocks falling from $45.6bn in December 2019 to over $44bn this month.
State Street Global Advisors and Fidelity Investments ranked as the fourth and fifth largest asset managers globally, with $3.05trn and $2.92trn in total assets under management.
Analyzed by geography, the US asset managers lead on the global list of the most successful companies, with eight of the top 10 asset management firms from the United States. Statistics also show the world’s largest banks like JP Morgan Chase, Goldman Sachs, and Bank of America were not among the top five asset managers in terms of managed assets.
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