(Updates with Nigerian budget in fifth paragraph, growth projection in sixth paragraph.)
Dec. 13 (Bloomberg) -- Morgan Stanley is adding Nigerian cement, consumer and bank shares to its frontier-market portfolio, as it bets on growth in sub-Saharan Africa’s second- largest economy.
Morgan Stanley bought shares of Dangote Cement Plc, Nigeria’s biggest company by market value, in September, according to data compiled by Bloomberg. It also added to holdings in Nigerian Breweries Plc, the West African nation’s largest brewer, as well as Guaranty Trust Bank Plc and First Bank of Nigeria Plc, Nigeria’s biggest and third-largest banks.
“There is strong loan growth in the banking system, after a couple of years of flat to negative loan growth,” Tim Drinkall, a New York-based fund manager at Morgan Stanley Investment Management with $340 million in assets under management in frontier markets, said in a phone interview. “Cement should benefit from years of underinvestment and a fiscal policy shift toward more public investment.”
Guaranty Trust Bank’s net loan growth expanded 19 percent to 704 billion naira ($4.3 billion) in the nine months through September from a year earlier. First Bank of Nigeria increased loans and advances 11 percent to 1.3 trillion naira in the same period. The Central Bank of Nigeria started a clean-up of the nation’s banking industry in 2009, firing the chief executives of eight lenders after a debt crisis threatened to destroy the industry.
The government of Africa’s biggest oil producer plans to invest more money in infrastructure projects including power plants, road and rail. Nigeria will boost spending on capital projects to 28 percent of its 4.8 trillion naira budget in 2012 up from 26 percent, President Goodluck Jonathan said today.
The West African nation is forecast to grow 7.2 percent in 2012, compared with 7.7 percent expansion this year, Jonathan told lawmakers in the capital, Abuja.
The Nigerian Stock Exchange All-Share index, which hit an eight year low Dec. 9, has dropped 21 percent this year, sub- Saharan Africa’s second-worst performer after Kenya. The Bloomberg NSE Banking Index, which tracks the performance of the West African nation’s 10 largest lenders, has slumped 37 percent this year, compared with a 21 percent drop in the MSCI Frontier Market gauge.
“I can’t see us taking off any exposure next year unless something drastic happens either in oil price or on the policy front,” said Drinkall. “The biggest risk is in the oil price, if Brent goes under $80 a barrel it will be an issue for Nigeria.”
--With assistance from Stephen Morris in London. Editors: Peter Branton, Linda Shen
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