The laggards: Nigeria, Venezuela, Egypt, India
Nigeria (NGE) ranked the lowest at number 62 in RobecoSAM’s October 2016 survey of sustainable economies based on ESG indicators. With an overall score below 3 (out of 10) Nigeria, fell short big time on social indicators such as human development index and social unrest. Governance indicators such as political stability and competitiveness are other areas where Nigeria lags behind the other world (ACWI) (VTI) economies.
The Nigerian Stock Market’s main board index is down 2.08% YTD (as of April 24); up 1.35% for the month. For the year so far, Consumer Staples are down 11.34%, and Healthcare has dragged performance by 8.28%; cushioned by the 11.49% rise in Utilities, and the 9.54% rise in Financials. The NYSE Arca-traded Global X Funds Nigeria ETF (NGE) (chart above) is down by about 5% YTD.
Nonetheless, the Nigerian stock market trades cheap currently at the price multiple of 12.84, as fund managers continue to approach Nigeria with caution. At a sector level, financials are trading at 0.54 times book, and real estate is trading at 1.4 times earnings, presently.
Third biggest country by 2050
However, Paul Arkwright, the British High Commissioner in Nigeria, expressed his country’s positive outlook on Nigeria (NGE). “By 2050, Nigeria will be the third biggest country in the world as it will overtake the USA (SPY) to join China (FXI) and India as the three biggest countries,” said Arkwright.
Nigeria is already on track in implementing much-needed reforms in its economy. As part of its 60-Day National Action Plan on Ease of Doing Business which (implemented from February 21), the Presidential Enabling Business Environment Council (PEBEC) has completed 31 reforms across 8 priority indicators. As part of its mandates, the council intends to:
- Remove constraints to doing business in Nigeria, and
- Move Nigeria up 20 places in the World Bank Doing Business Rankings. Its current rank is 169.
Other ESG emerging market laggards
Venezuela, Egypt (EGPT), and India (EPI) were the other emerging market (EEM) (VWO) laggards in the list at rank 61, 60, and 59, respectively.
Venezuela: with a near or less than 5 score under all three of the ESG (Environmental, Social, and Governance) indicators, lagging significantly on governance factors such as political stability, corruption, and competitiveness.
Egypt: ranked 60th on the RobecoSAM sustainability ranking, Egypt lags behind on governance and social indicators. Political stability and social unrest are the heaviest drag on the economy’s sustainability ranking.
India: At rank 59, social and environmental issues are the biggest drags on India’s (EPI) ranking. The country is particularly low on the human development index and the political stability.