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Trying to raise hundreds of millions of dollars from international investors in the midst of state and presidential elections alleged to be plagued by abuses is not for the faint of heart.

But this week, the United Bank for Africa, the country’s largest bank by assets, raised $300m (€220m, £150m) from international institutional investors through an equity capital placement, a big sum by the standards of Africa’s capital markets, despite allegations of abusive election practices. Nigerians go to the polls on Saturday to vote for a president. State elections were held last week.

The UBA transaction was oversubscribed, allowing the bank to raise $100m more than planned. It highlighted why bankers are converging on Nigeria, a country many investors see as Africa’s most promising frontier market.

Nigeria, once a basketcase of the financial world, is now a darling, having cleared more than $30bn of external debt in the past year. It has also embarked on, among other things, reforms in its banking sector.

“Nigeria is the giant that is awakening,” says Yvonne Ike, senior country officer for Nigeria for JPMorgan, which managed the UBA’s equity placing along with Moscow investment bank Renaissance Capital.

“Of course there are . . . a lot of concerns during the election period. We also absolutely have our eye on the political risks at the present, but we are fixed more firmly on the long-term opportunities.”

There is a hope within the international Nigerian business community that with oil revenues high, any incoming government will be able to buy off discontent.

But domestic and international observers remain worried that the widespread problems with the election will undermine the legitimacy of the incoming administration.

This has not stopped some investors from committing money, says Christopher Hartland-Peel, African equity analyst at Exotix, a London-based brokerage. Exotix, with a local Nigerian bank, is placing $45m of equity with domestic and international investors for IGI Insurance, the number two insurer by assets.

In addition to an increasing number of equity placements, there have been bond issues by two Nigerian banks, some private equity activity, and a growing number of mergers and acquisitions. Some companies are considering an international stock market listing this year.

Investment banks, including JPMorgan, Citi, Deutsche Bank, Merrill Lynch, Credit Suisse, and HSBC have recently stepped up their presence in Nigeria and sub-Saharan Africa. Ghana could become the first west African nation to enter the international bond markets with a benchmark sovereign bond issue this year and Botswana and Zambia are also increasingly attracting foreign investor interest.

Along with Nigeria, these three countries have seen “pronounced foreign investor interest in their local currency debt markets”, according to a report this month by the International Monetary Fund. Early estimates suggest that in the first half of 2006, Nigeria received portfolio inflows of roughly $1bn, more than five times the total capital flows in 2005.

Additional reporting by William Wallis and Dino Mahtani

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