Nigeria’s loss is E. Africa’s gain as oil prices tumble

Investors targeting Africa are looking east as an oil-market rout depresses economic growth prospects in Nigeria and other crude-producing nations.
Stocks have surged 22 percent in Tanzania, 18 percent in Uganda and 9.4 percent in Kenya since oil began falling from a peak of $115.71 a barrel on June 19. Lower fuel-import costs are helping to keep inflation and interest rates in check and bolster their economies.
That contrasts with a 24 per cent slump in the benchmark stock index in Nigeria, which relies on oil for 95 per cent of foreign-exchange income and faces political instability ahead of elections in February.
“It’s mostly the east African countries that will benefit from the lower oil price,” Joseph Rohm, a fund manager who helps oversee Cape Town-based Investec Asset Management’s $2 billion Africa fund, said recently. “Lower inflation implies lower interest rates for longer, which is good for consumers. Low rates are also good for credit growth, which is good for the banks. Kenya (NSEASI) is one area where we have increased our exposure.”

Turmoil
Oil exporters such as Nigeria, Angola and Ghana, which are on Africa’s west coast, have been left exposed to financial market turmoil after a 42 per cent plunge in the price of Brent crude in the past six months.
Authorities were slow to build adequate savings and reduce the reliance on oil earnings to fund their budgets when crude prices soared, putting their economies now at risk.

editorial@ug.nationmedia.com

SOURCE: Daily Monitor

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