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The founder of Research Alpha and seasoned Asia-Pacific investor, Michael McGaughy, has hailed recent macroeconomic reforms by the Central Bank of Nigeria (CBN) and other government institutions as transformative for Nigeria’s investment profile, positioning the country as an increasingly attractive destination for global capital.
McGaughy’s remarks coincided with the International Monetary Fund’s (IMF) conclusion of its 2025 Article IV Consultation with Nigeria, which highlighted the successful implementation of structural reforms over the past two years—improving macroeconomic stability and reinforcing economic resilience.
Since 2017, the Research Alpha fund, which has delivered cumulative returns of over 130 per cent, has maintained exposure to Nigerian equities. In a recent interview with Asian Century Stocks, McGaughy credited Nigeria’s reform momentum to President Bola Tinubu’s administration, citing early policy shifts such as the liberalisation of the naira, fuel subsidy removal, and power sector deregulation.
“These reforms are the kind every developmental economist dreams of,” he noted, emphasising that structural bottlenecks are finally being addressed, particularly with the commissioning of the Dangote Refinery, which is helping reduce dependence on imported refined products and saving foreign exchange.
McGaughy aligned with Fitch Ratings’ recent assessment, which identified the CBN as central to Nigeria’s economic recovery. He praised the leadership of Governor Olayemi Cardoso, describing his role as pivotal in restoring financial stability through prudent monetary and regulatory reforms.
Under Cardoso, the CBN’s Monetary Policy Committee has taken a firm anti-inflationary stance, raising the benchmark interest rate by 875 basis points to 27.5 per cent in 2024. This policy shift underscores the CBN’s resolve to maintain price stability amid short-term economic pressures.
A key policy overhaul involved replacing Nigeria’s longstanding multiple exchange rates with a unified, market-driven “willing-buyer, willing-seller” FX framework, supported by the B-Match digital trading platform. According to the IMF, this move has been “transformational.”
“Gross and net international reserves increased in 2024, backed by a strong current account surplus and a sharp rise in portfolio inflows,” the IMF reported. The FX premium between official and parallel markets narrowed dramatically—from over 60 per cent to below 3 per cent—while Q1 2025 saw FX inflows of $6.9 billion. External reserves peaked at $40.9 billion at the end of 2024, covering more than eight months of imports, exceeding global adequacy thresholds.
The IMF also acknowledged the reforms’ positive impact on exchange rate stability, noting, “Interventions and FX market liberalisation have brought renewed confidence to the naira.”
On the equities front, McGaughy observed that Nigeria’s stock market has responded favourably to the reform agenda, with the All Share Index recording gains despite pressure from subdued oil prices.
“Corporate fundamentals are improving. Companies are regaining pricing power, and this is beginning to reflect in their financials,” he said.
Nigerian stocks, he added, continue to offer compelling valuations. Many listed companies trade below 10 times earnings, with share prices still 70–90 per cent below historical USD peaks. He singled out one non-bank financial institution as trading at just three times earnings with a 5 per cent dividend yield—“a generational value,” he said.
“Nigeria currently offers better value than any Asian market,” McGaughy asserted, even as he acknowledged investment opportunities in Sri Lanka and Pakistan. He also highlighted the importance of patience in frontier market investing. “Nigeria was our biggest performance drag—until recently. But several positions have now doubled or more in 6–12 months.”
He added, “We hold long-term, reinvest dividends, and let compounding do its magic.”
On the external funding front, Nigeria’s return to the Eurobond market in January 2025—its first in four years—was heralded by the IMF as evidence of renewed investor confidence and increased portfolio inflows.
Responding to the IMF’s endorsement, CBN Governor Cardoso noted, “In a time of global volatility, this independent assessment validates that responsible, forward-looking policies matter. Nigeria is regaining credibility, anchoring expectations, and laying the groundwork for long-term, inclusive growth.”
Cardoso added that the IMF’s feedback affirms the need for continued discipline and vision to build a more resilient economy—one that earns the trust of citizens, investors, and global partners alike.
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