The phrase "frontier market" refers to markets around the world that are beginning to develop and have yet to become completely stable. These markets lack a lot of standard legal and financial regulatory institutions, making them riskier investment environments for investors.

Often, the securities market is less developed and political stability and investor rights are a concern. There is no exact line between frontier markets and emerging markets, but frontier markets tend to be just a step below emerging markets. The BRIC countries – Brazil, Russia, India and China – are considered to be emerging markets.

While frontier markets are inherently riskier and not as established as emerging markets, the potential for investing in one of them in 2016 is tremendous.

Fall in Commodity Prices

Many of the frontier markets depend heavily on commodities. For example, Nigeria is a promising country and its economy is heavily tied to oil. Commodities in 2016 will have a year filled with heavy market divergences as monetary policy influences their price. Investors are not taking risks right now among rising interest rates, sliding commodities and problems with China’s overall macroeconomic situation.

However, countries that rely heavily on oil could use the fall in commodity prices as an opportunity to restructure their economies and diversify. At the same time, the lower prices in the commodity markets will entice investors to get in during a market downturn. Governments will be forced to improve economic conditions by not relying on the sales of a single commodity.

Frontier markets have favorable conditions that include low debt levels both publicly and privately. It will be a process to avoid heavy reliance on commodities, but constructing a diverse economy will reap profitable returns for investors who are getting in on the ground floor. Nigeria and the majority of other African countries can all be considered frontier markets. The vast amount of African markets will be an excellent opportunity for bold investors.

Investing in Booming Infrastructure

A main reason to invest in frontier markets – African markets in particular – is that these markets lack many of the basic infrastructures that the developed countries take for granted. For example, a lot of Nigeria lacks basic transportation and modern types of banking institutions. Instead, mobile banking has become quite an important fixture in day-to-day life for Nigerians. Many telecommunications companies are sprouting up around this industry and are becoming promising investment opportunities for investors.

China has long taken an interest in Africa. China has influenced Africa's roadways, buildings and airports as it partners up with local businesses and stamps its role throughout the continent.

Many multinational companies are beginning to establish themselves throughout Africa as well. There is no shortage of areas that need improvement. Once the basic infrastructure has become established, the middle class will be a booming fixture of these markets, which will bring in more businesses and an increased share of foreign investment.

Long-Term Enticements

Frontier markets offer something that established markets do not: There is more room for incredible growth not seen elsewhere. There is a large amount of natural resources and human capital. Demographics point toward youthful booming populations that will begin outpacing the superpowers of the world by the middle of the upcoming century.

The benefits from improving the infrastructure will foster even greater economic development paired with swift developments in technology. Africa has many of the most promising and exciting frontier markets, but they are not without their share of potential problems. As they go through their growing pains, frontier markets will be excellent fixtures for diversified portfolios.

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