Nigeria’s share index climbed to a two-year high on Wednesday as investors snapped up Nigerian stocks after MSCI increased the country’s weighting in its frontier market index.

The stock market has gained 13.7 percent in the two weeks since MSCI in June moved the country’s weight up to 7.9 percent from 6.5 percent. Funds tracking the index moved to buy shares to replicated the new weighting.

Nigeria’s all-share index rose 1.38 percent on Wednesday to near 34,000 points. Unilever, listed on the MSCI index, gained the maximum 10 percent allowed to 40.79 naira per share. Oando rose 8.13 percent.

Analysts say local funds have also started to take positions in equities in anticipation of offshore investors returning. Last month, Nigeria’s pension fund regulator raised investment limit for equities.

Low valuations have made stocks attractive as well, especially in the relatively more liquid banking sector, analysts say.

“Some internationals have returned to the market, others are a bit more cautious,” one equity analyst told Reuters.

Nigeria is grappling with a recession and a currency crisis brought on by low oil prices, which has eaten away at its foreign reserves. The central bank has been injecting U.S. dollars into its foreign exchange market to ease chronic dollar shortages.

Analysts say stock market turnover has more than doubled since April. From May, average daily turnover has risen to more than $16 million. It was stuck at around $6 million between January to April, thanks to the central bank’s currency moves.

The outlook for Nigerian equities has been improving after the bank in April allowed investors to trade the naira at market-determined rates, attracting interest from foreign players that have otherwise been on the sidelines.

Analysts say MSCI will not implement specific index reviews for Nigeria due to ongoing dollar shortages and that a pick up in oil prices would help boost foreign reserves.

On Monday, Vice President Yemi Osinbajo, who is standing in for President Muhammadu Buhari, signed a 2017 budget meant to help jump-start the economy out of recession, which has improved sentiment, analysts say. Buhari is on medical leave in Britain.

Source: Money Web