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MTN Nigeria Communications surged by 10% in Lagos Monday, the most allowed by the exchange and matching the biggest gain since its May market debut, after the country’s Attorney General dropped a US$2 billion tax claim (about R28.8 billion at current exchange rates) against the mobile phone company.

The removal of the payment demand is a boost to investor confidence, ending fears of a cash outflow, Tunde Abidoye, an analyst at FBNQuest, said by phone from Lagos. The stock has climbed 29% since it started trading almost eight months ago and is the biggest contributor by index points to the 4.2% gain in the Nigerian benchmark index since then.

The Nigerian Stock Exchange All Share Index rose 0.7% on Monday, extending its rally to an 11th day. The gauge is up more than 10% this year, the most among 94 major global equity benchmarks tracked by Bloomberg, as traders seek alternatives to low yields in the local fixed-income market. Trading in MTN Nigeria was more than four times the daily average volume for the past three.

The phone company’s stock is benefiting from an upsurge in investor interest in Nigeria’s attractively valued stocks, but the rally may not be sustained beyond this week, Abidoye said. The 14-day relative strength index for MTN Nigeria, which also climbed by the 10% maximum in each of its first four days of trading in May, has risen to almost 75, above the level of 70 that signals to some technical analysts that the gain may be overdone. – Fin24/Bloomberg