Feb. 13 (Bloomberg) -- Renaissance Capital, a unit of the Russian investment bank controlled by billionaire Mikhail Prokhorov, recommends investors are overweight in Nigerian stocks as growth in the West African nation surges.

In Africa, “it’s the largest and most attractive market to us,” RenCap Chief Executive Officer John Hyman said in an interview in Lagos, Nigeria’s commercial capital, on Feb. 11. “We would say to any long-term investors: you should have some Nigeria in your portfolio, you overweight Nigeria.”

The Nigerian Stock Exchange All-Share Index has gained 18.4 percent this year, the third-best performer behind benchmark indexes in Bulgaria and Vietnam, according to data compiled by Bloomberg. While Nigerian stocks gained 35 percent last year, the index has only rebounded to half the March 2008 peak it reached before the global financial crisis and a government bailout of the banking industry triggered a market slide.

Sub-Saharan Africa’s second-largest bourse is targeting a market value of $1 trillion by 2016 as state power companies being sold to bidders, including Siemens AG, Korea Electric Power Corp., may be required to list on the exchange. Power industry reform will add to economic growth, while the Islamist insurgency in Nigeria is a “manageable” risk, said Hyman.

“We think the growth rate continues to be attractive” valuations continue to be relatively attractive,’’ he said. “And the pace of reform is good.”

Economic Growth

Nigeria’s economy, estimated at $272.6 billion by the International Monetary Fund, is forecast to grow 6.5 percent this year, the same pace as last year, according to the national budget presented by President Goodluck Jonathan to lawmakers in October. The Nigerian Stock Exchange’s market capitalization is currently 50.1 trillion naira ($67.5 billion), according to data compiled by Bloomberg.

The outlook for the rest of sub-Saharan Africa also looks promising for investors, with key indicators on reform, governance and literacy showing improvement and violence declining, Hyman said.

--With assistance from Maram Mazen in Abuja. Editors: Dylan Griffiths, Paul Richardson, Dale Crofts.