Nigeria may be the most compelling of the emerging markets fixing bad policies

• Post-Covid, one of the most compelling themes in our strategy research is policy course correction after a crisis

• We screen for most stringent remaining fiscal (primary balance increase) and monetary (positive real rate) policy fixers

• And for upside to currency (based on REER reversion to 10y median) and equity valuation (discount to 5y median PB, PE)

  
  

Argentina, Bangladesh, Egypt, Ghana, Kenya, Nigeria, Pakistan, South Africa, and Turkey are among those in global emerging markets where the positive investment case, post-Covid, has been driven by the recovery, in some cases a stuttering one, from a crisis. Within the group, the best combination of more gains from policy course correction and cheap valuation may be in Nigeria.

Apart from AI Tech this policy course correction theme has for investors, if well-timed, of course, arguably been the most the successful top-down strategy in emerging markets (more than, for example, looking for growth themes led by commodities, manufacturing, tourism, or resilience themes based on sovereign balance sheet strength or economic self-sufficiency).

Policy course correction has, to varying degrees, taken the form of currency devaluation and greater flexibility, mobilising foreign "bail-out" capital, fiscal deficit reduction (primary balance, which excludes debt servicing costs), monetary policy contraction (raising policy interest rate to re-establish anti-inflation credibility or rein in growth that was unsustainable for fiscal or current account balances), and initiating structural reform.

The latest IMF forecasts provide data on which to screen for the most stringent course corrections which remain ahead on fiscal and monetary policy.