Nigeria is witnessing an impressive economic turnaround that has attracted the attention of sophisticated international investors, with the globally respected Research Alpha fund declaring Nigeria to have “the world’s best equity set-up” following extensive Central Bank of Nigeria’s (CBN) monetary policies and economic reforms that have begun to show substantial positive results.

The founder of Research Alpha fund and a veteran Asia-Pacific investor, Michael McGaughy, with nearly four decades of experience in emerging markets, has identified Nigeria as offering unprecedented investment opportunities comparable to Indonesia following the Asian Financial Crisis. 

His fund, which has generated a +130% return since inception, has been positioned in Nigerian equities since 2017 and is now witnessing the fruits of patient capital deployment.

According to McGaughy, in an interview with Asian Century Stocks, Nigeria’s transformation began with President Bola Tinubu’s inauguration approximately two years ago, which triggered “far-reaching reforms, including freeing the currency, ending petrol subsidies, and deregulating electricity generation and distribution”. 

These measures, he noted, represent “a developmental economist’s wet-dream.” The reforms have been particularly significant in addressing long-standing structural issues.

The launch of the massive Dangote refinery is set to end the foreign exchange-draining practice of exporting crude oil while importing refined products. 

“It’s big enough to supply all West Africa so the country could start exporting refined products very soon,” McGaughy observed, highlighting the facility’s potential to transform Nigeria into a regional energy hub.

Central to Nigeria’s economic turnaround has been the appointment of CBN Governor, Olayemi Cardoso, who recently emerged as the Central Bank Governor of the Year at the 2025 African Banker Awards for his role in “steering monetary and regulatory reforms that have restored stability and confidence in Nigeria’s financial system.” 

Since taking office in September 2023, Cardoso has implemented aggressive monetary policy measures to combat inflation and restore market confidence. 

The CBN raised the Monetary Policy Rate (MPR) by 875 basis points to 27.5% in 2024, a decisive move that demonstrated the central bank’s commitment to price stability despite short-term economic pressures. 

The reforms under Cardoso’s leadership have been comprehensive, focusing on “stabilising prices, improving the foreign exchange market and fostering sustainable growth”, while addressing fundamental structural issues that had previously undermined investor confidence.

The Nigerian equity market is responding positively to the reform agenda. McGaughy reported that the country’s All Share index has gained nearly 18% year-to-date despite weak oil prices affecting Nigeria’s largest export commodity. 

More significantly, corporate fundamentals are improving as “firms are regaining pricing power and income statements are starting to reflect this” following several years of declining earnings. 

Foreign investor participation has surged dramatically, with international investors accounting for 32% of market turnover in the first four months of the year – nearly triple the previous year’s participation rate. This renewed international interest reflects growing confidence in the sustainability of Nigeria’s reform programme.

Despite recent gains, Nigerian equities continue to offer compelling valuations that attract value-conscious investors. McGaughy noted that most companies are trading below 10x earnings, with many stocks still 70-90% below their all-time USD highs. 

His fund’s favourite non-bank financial institution is trading at approximately 3x earnings with a 5% dividend yield, representing what he considers generational value. “While Nigeria currently has better value than any Asian market, Sri Lanka and Pakistan both look attractive,” McGaughy stated, emphasizing Nigeria’s superior position in the global emerging markets landscape.

McGaughy acknowledged that patience has been required, noting that Nigeria had been “our biggest drag on performance” until recently. However, he emphasized that many holdings have doubled or more in the past six to 12 months, reflecting the delayed but significant impact of structural reforms. The investor’s long-term approach aligns with Nigeria’s gradual but fundamental transformation. “We then hold for a long time, reinvest our dividends, and let compounding do its magic,” he explained, highlighting the importance of patient capital in emerging market investing.

Nigeria’s reforms are occurring within a broader context of emerging market restructuring. McGaughy compared the current situation to successful transformations in other markets, noting that: “While leaders like Milei in Argentina get more press, Nigeria’s reforms are just as significant.” The comparison to post-Asian Financial Crisis Indonesia is particularly relevant, as McGaughy noted that Nigeria today represents “a big and diverse country, equities are very inexpensive, few investors are paying attention, but fundamental reforms are underway that should benefit the country long-term.”

The structural nature of Nigeria’s reforms suggests sustained benefits for investors willing to take a long-term view. The combination of currency liberalization, subsidy removal, infrastructure development, and monetary policy normalization creates multiple drivers for economic growth and corporate profitability. With Cardoso’s recognition as ‘Central Bank Governor of the Year’ providing international validation of Nigeria’s monetary policy framework, and continued reform implementation under the Tinubu administration, Nigeria appears positioned to attract increased international investment flows and deliver superior returns for patient capital. 

The convergence of deep value, fundamental reform and improving market dynamics positions Nigeria as what McGaughy calls “the world’s best equity set-up” – a rare combination that has historically delivered exceptional returns for investors with the conviction to act when others remain sceptical.

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