Fresh from its coronation as the biggest economy in Africa, Nigeria has scored another first. The troubled West African country has emerged as the frontier-market economy that is attracting the most attention from American and European multinationals.
Nigeria is joined by Argentina and Vietnam as the frontier markets that multinational corporations are most interested in, according to a new index of corporate sentiment.
The Frontier Markets Sentiment Index, created exclusively for the Wall Street Journal by Washington DC-based advisory firm Frontier Strategy Group, tracks the level of interest shown by major European and American multinational companies in countries across the frontier markets world.
The index is a based on information collected from FSG’s roughly 200 multinational clients, which include companies such as Coca-Cola KO -0.12%, General Electric GE +0.30%, Novartis NOVN.VX -0.06%, Dell and Akzo Nobel AKZOY -0.97%. Matt Lasov, FSG’s global head of advisory and analytics, explains how the index works: “We collect data about which countries the companies are watching for potential future investment. Over time, that gives us a clear picture of their market priorities—which countries are they including in their future plans and which they are dropping.”
The research provides two key insights: the current state of sentiment toward countries in the frontier markets, and the change in sentiment over time. Corporate sentiment is calculated as the percentage of companies that include a particular country on their watch-list. If 50 of the 200 companies are keeping an eye on a particular country, the sentiment index score would be 25%.
The data point to some striking regional differences. Of the 20 countries attracting most interest from multinationals, nine are in sub-Saharan Africa. Few will be surprised to see Kenya and Nigeria among the top tier, but Ethiopia and Tanzania making it onto the list as the 12th- and 13th-most watched countries respectively might cause a few raised eyebrows.
One person who won’t be surprised to see growing interest among multinationals for investing in Ethiopia is Alexander Benard, chief operating officer of Schulze Global, a private equity firm. “We are very excited about Ethiopia,” Benard says. “We believe it has huge potential.”
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