NGE - Nigeria ETF

[Spekulatius]

I know little about this country, except that it holds large oil reserves and is subject to corruption. The NGE ETF appears to be one of the worst performers of all times as it fell from ~ $60 in 2014 to ~$12.5.  The above ETF apparently yields ~13.5% dividend yield. Hard to believe there is no opportunity there. I don’t own any, but have started to look into this.

 

https://www.aljazeera.com/news/2019/06/20-years-democracy-nigeria-changed-190611124203153.html

[muscleman]

How does taxation work for US investors on passive ETFs like this? Does anyone know?

I am interested in JPXN as well.

 

It seems to me that a lot of foreign index ETFs are setting up for a leg up.

[Spekulatius]

How does taxation work for US investors on passive ETFs like this? Does anyone know?

I am interested in JPXN as well.

 

It seems to me that a lot of foreign index ETFs are setting up for a leg up.

 

It works just like with other domestic ETF’s. Sometimes, the dividend taxation’s is a bit different. They do have a breakdown for 2018 here:

https://www.globalxetfs.com/content/files/2018-Year-End-Tax-Supplement-Global-X-ETFs.pdf

[DooDiligence]

Bad karma here.

 

The world's too big to waste time looking to get screwed.

 

Take any exposure to West Africa through big oil.

 

Opinion based on travel experiences.

[cameronfen]

Bad karma here.

 

The world's too big to waste time looking to get screwed.

 

Take any exposure to West Africa through big oil.

 

Opinion based on travel experiences.

 

I don’t know.  You are more diversified through an ETF and if you pick any oil company with meaningful exposure to Nigeria any negative shock to the economy should effect them too.  I think the long term trend will be Nigeria becoming a middle class country.  Hard to see how oil will get you exposure really to that long with also the same downside exposure of instability. 

[Spekulatius]

Bad karma here.

 

The world's too big to waste time looking to get screwed.

 

Take any exposure to West Africa through big oil.

 

Opinion based on travel experiences.

 

 

RDS operates down there, but I think the exposure is fairly small. In any case, the non energy exposure in an ETF makes it more interesting and the Nigeria ETF seems mostly banks and consumer goods,, which seems way more attractive to me.

 

The US market has been outperforming pretty much any other market. (Except Russia) for the last 10 years, but that is unlikely to continue. It’s a great time to diversify out of the US in my opinion.

 

I don’t know.  You are more diversified through an ETF and if you pick any oil company with meaningful exposure to Nigeria any negative shock to the economy should effect them too.  I think the long term trend will be Africa becoming a middle class country.  Hard to see how oil will get you exposure really to that long with also the same downside exposure of instability.

[SharperDingaan]

There is corruption ..... and there is corruption.

Even Russia, is less corrupt than Nigeria! - and that's saying something.

https://risk-indexes.com/global-corruption-index/

 

SD

[cameronfen]

There is corruption ..... and there is corruption.

Even Russia, is less corrupt than Nigeria! - and that's saying something.

https://risk-indexes.com/global-corruption-index/

 

SD

 

The corruption index has basically a 1-1 correlation with GDP per capita.  It’s a fact of life that most developing and frontier countries are very corrupt.  Yet depending on if they have certain institutions (what they are I don’t know exactly but could guess like a focus on a market oriented economy and a governing system that realizes it benefits from economic growth) that allows for fast economic growth, you have done really well historically.   

[no_free_lunch]

I question the dividend yield.  They paid out $0.90 last year and $0.42 in 2017 and 2016.  That works out to 3-7% dividends. This year might be an anomaly.

 

For me there needs to be strong respect for property rights in order to invest.  I wonder who is the patsy at this table, it feels like it would be me.

[ratiman]

The problem with Nigeria is that it's not even trying. For instance, visitors from the US require a visa to visit Nigeria. What is Nigeria afraid of exactly? Nigeria doesn't want US hard currency? The current government recently banned rice imports as if somehow a nation of 180 million, most of them desperately poor, could achieve economic self-sufficiency. Until Nigeria gets new leadership or policies the per capita income will continue to decline. There is huge potential, especially with all the english speakers, but until Nigeria is open for business it won't grow.

[cameronfen]

The problem with Nigeria is that it's not even trying. For instance, visitors from the US require a visa to visit Nigeria. What is Nigeria afraid of exactly? Nigeria doesn't want US hard currency? The current government recently banned rice imports as if somehow a nation of 180 million, most of them desperately poor, could achieve economic self-sufficiency. Until Nigeria gets new leadership or policies the per capita income will continue to decline. There is huge potential, especially with all the english speakers, but until Nigeria is open for business it won't grow.

 

A lot of nations demand visa’s from the United States.  Nigeria has the population greater than Russia.  Sure they are not sworn enemies of the US, but why can’t Russia demand visa’s and Nigeria not.  As far as rice imports there is a lot of evidence that that agricultural aid from developed nations does more harm the help.  Not sure if this is the reason behind that.  Additionally, a strong agricultural sector in a nation has strategic advantages other than just economic so you might want to be self sufficient agriculturally if possible. I know nothing about banning US hard currency, curious if you could elaborate. 

[ratiman]

I get that visas are a matter of national pride, but Nigeria is desperately poor. There is no reason a desperately poor country should be making it difficult for tourists to visit. And if Nigeria won't do something as simple and easy like that, imagine how hard it is to try to invest in oil and gas or telecom. This is a country that had $10 of FDI per person last year. Until it opens up for business, I don't see it as being a good investment. But maybe that pessimism is already priced in, I don't know. Nigeria certainly has huge potential. 

[DooDiligence]

Tourism in Nigeria?

 

???

 

---

 

More like migrant workers & people trying to escape conflict, disease & disasters.

 

www.migrationpolicy.org/article/nigeria-multiple-forms-mobility-africas-demographic-giant

 

As an aside, I'm surprised at the number of Ghanaians residing in Nigeria.

Ghana is a wayyy better place to be (at least from a gringos POV).

[cameronfen]

I haven’t been so take this with a grain of salt, but Lagos is one of the more prosperous places in Africa, so I wouldn’t be surprised if people wanted to move there.  That being said, Africa is no longer the Africa that people have in their heads.  35% of the African population is now in the global middle class or above (this of course is significantly below US middle class, but is around $10 PPP a day).  Some countries in Africa, Nigeria being one member in the forefront of development, are growing almost peak China or current day India levels fast.  FDI usually follows growth and does not precede growth and it will follow. 

[petec]

I question the dividend yield.  They paid out $0.90 last year and $0.42 in 2017 and 2016.  That works out to 3-7% dividends. This year might be an anomaly.

 

For me there needs to be strong respect for property rights in order to invest.  I wonder who is the patsy at this table, it feels like it would be me.

 

Also be careful with the impact of fx changes on dividend yields expressed in dollars.

[ratiman]

I haven’t been so take this with a grain of salt, but Lagos is one of the more prosperous places in Africa, so I wouldn’t be surprised if people wanted to move there.  That being said, Africa is no longer the Africa that people have in their heads.  35% of the African population is now in the global middle class or above (this of course is significantly below US middle class, but is around $10 PPP a day).  Some countries in Africa, Nigeria being one member in the forefront of development, are growing almost peak China or current day India levels fast.  FDI usually follows growth and does not precede growth and it will follow.

 

  Nigeria is growing at negative per capita growth rates for the last five years. South Africa also has negative per capita growth for the last few years. Some countries are doing well, like Ghana and Ethiopia, but Nigeria and South Africa are pretty important. It's hard to grow when the government is hostile to business formation.

 

This is a video about how hard it is to start a business in Senegal.

 

[cameronfen]

I haven’t been so take this with a grain of salt, but Lagos is one of the more prosperous places in Africa, so I wouldn’t be surprised if people wanted to move there.  That being said, Africa is no longer the Africa that people have in their heads.  35% of the African population is now in the global middle class or above (this of course is significantly below US middle class, but is around $10 PPP a day).  Some countries in Africa, Nigeria being one member in the forefront of development, are growing almost peak China or current day India levels fast.  FDI usually follows growth and does not precede growth and it will follow.

 

  Nigeria is growing at negative per capita growth rates for the last five years. South Africa also has negative per capita growth for the last few years. Some countries are doing well, like Ghana and Ethiopia, but Nigeria and South Africa are pretty important. It's hard to grow when the government is hostile to business formation.

 

This is a video about how hard it is to start a business in Senegal.

 

 

I think that’s misleading.  Recently growth has been about 2.3% YoY which is true only slightly below 2.6% population growth, but a lot of that is raising kids who aren’t going to contribute to the economy for the next 10 years.  Here is a graph from trading economics where growth was as high as 8% in 2010.  https://tradingeconomics.com/nigeria/gdp-growth-annual

 

Nigeria institutions (especially in the south) hasn’t gotten any worse since then.  Again this idea that institutions proceed growth is true in some places, but every developing country has terrible institutions.  The truth is both institutions and growth are co-reinforcing, so if you are waiting for institutions to reach a developed nation standard you are waiting for the country to grow gdp per capita to developed nation standards. 

 

As far as regionally, you are not really investing in the North economically, as you only care about the oil.  At this point a bet on Nigeria is a bet on the south, which is growing faster than the nation as a whole (as the north is a perpetual basket case).  Lagos itself is growing at around 4% a year annually. 

 

As far as South Africa, institutions in South Africa are considered the best in Africa.  So I think it throws a wrench in this thesis that institutions are the central determinant of catch-up growth.  Either way, South Africa has been in a recession partially due to low commodity prices which is hardly policy makers fault. 

[Spekulatius]

I question the dividend yield.  They paid out $0.90 last year and $0.42 in 2017 and 2016.  That works out to 3-7% dividends. This year might be an anomaly.

 

For me there needs to be strong respect for property rights in order to invest.  I wonder who is the patsy at this table, it feels like it would be me.

 

It looks like NGE pays an annual dividend ($0.76 this year), but the distribution date changed around, confusing some yield calculators. I beeline the real dividend yield is 5.7%.

 

 

Regarding VISA - well that can’t be the issue since China requires VISA too and it doesn’t seem to hurt them. Many countries will require VISA for US citizen if the US requires VISA  for their citizens to visit the US.  The issues with  Nigeria are known and I’d assume are priced it, the question is does it get better or does it get worse. I have no clue and haven’t acted upon the idea yet and put this on my watch list for the time being.

[ratiman]

Nigeria has a severe form of Dutch disease in which  the strong oil exports  price out manufacturing exports. At a time when manufacturing should be growing rapidly, Nigeria's manufacturing sector has been in decline since the 90s. Without manufacturing, Nigeria won't be able to pull itself out of poverty. Much of the oil surplus goes to buying imported food, like the famous pizza ordered from London.

 

https://www.thesun.co.uk/news/8758047/nigerians-ordering-pizza-from-london-and-using-british-airways-to-make-4000-mile-delivery/