Investors skittish about Nigerian assets as plunging oil prices pummel the West African nation’s economy are casting their eyes across the continent to Kenya. The World Bank raised its growth forecast for Kenya on March 5, saying oil prices that have tumbled 48% since June would boost the economy of the nation, a net importer of crude. Bdlive report.
Kenya, with 41-million people and a gross domestic product of $55bn, is the biggest economy in East Africa, with tea, coffee and tourism among its main sources of foreign exchange. Investments in infrastructure, agriculture and manufacturing are creating more jobs and should increase growth to 7% by 2017, the World Bank said after upgrading this year’s projection to 6% from 4.7%.
While Nigeria dwarfs Kenya with its $520bn economy and population of 170-million, it relies on oil for 90% of export earnings and 70% of government revenue. The plunge in oil prices will slow growth to 4.8% in 2015, compared with 6.3% in 2014, the IMF said.
By contrast, Nigeria is set to slow, the International Monetary Fund said the same day. The continent’s biggest oil producer is struggling with falling export revenue and a loss of investor confidence, after it postponed elections amid the insurgency by the Islamist group Boko Haram in the country’s northeast.
“Some investors think it makes more sense to be overweight Kenya versus Nigeria,” said Mahan Namin, a money manager at Insparo Asset Management, which sold its Nigerian sovereign bonds last year and has bought more Kenyan debt this year. “The divergence with Nigeria is a case of Kenya’s revenue base being more diversified and oil prices being lower.”
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