Foreign investors take over Nigeria’s capital market

By Odunew Segun

For the first time in 2019, investment by foreign investors in the Nigerian equities market recorded positive growth, rising by 61.4 per cent in the second quarter of the year.

Recall that in Q1 of 2019, Nigeria suffered a net deficit of N26.6 billion in foreign portfolio transactions due to political and macro-economic uncertainties which affected foreign investors’ confidence in Nigeria’s stock market.

According to the Nigerian Stock Exchange (NSE), foreign inflow from foreign portfolio investors (FPIs) increased to N41.78 billion in April from N25.89 billion in March of the same period under review.

In the report, foreign portfolio inflows surpassed outflows by N6.64 billion in April, making it the first time the market will be experiencing positive growth in 2019.

Foreign portfolio inflows stood at N41.78 billion as against outflows of N35.14 billion, indicating 37.1 percent increase in total foreign transactions from N56.09 billion in March 2019 to N76.92 billion in April 2019.

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With more activities by foreign investors, who dominate transactions at the market, total transactions at the market consequently increased from N110.11 billion in March to N148.9 billion in April.

Foreign investors accounted for 51.66 percent of total transactions in April as against 48.34 percent by domestic investors, thereby sustaining a familiar trend of foreign dominance.

In recent years, local investors have begun to lose their grip on the Nigerian capital market after previously dominating for two years consecutively before 2018.

The foreign investors are beginning to dominate the stock market even though the majority of the transactions are tilted towards outflows.

The amount of investment by local investors reduced to N1.185 trillion in 2018 as against N1.335 trillion in 2017, thereby accounting for 49.13 percent of total transactions in the equities market in 2018 compared with 52.51 percent in 2017.

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The report also showed that foreign portfolio transactions dropped by N159.95 billion in the first quarter of 2019, representing a decrease of 41.89 percent compared to the turnover in the first quarter of 2018. Total foreign portfolio transactions dropped from N381.82 billion in first quarter 2018 to N221.87 billion in first quarter 2019.

Total transactions at the equities market had declined from N2.543 trillion in 2017 to N2.404 trillion last year. With these, foreign investors accounted for 50.87 percent of total transactions at the equities market in 2018 compared with 47.49 percent in 2017.

Foreign investors had accounted for the largest transactions at the Nigerian stock market between 2011 and 2015, but were overtaken by domestic investors in 2016, who sustained their marginal lead in 2017.

Foreign transactions, which stood at N1.54 trillion in 2014, had declined considerably to N518 billion in 2016, before making a remarkable recovery to N1.208 trillion in 2017.

Conversely, domestic investors, which had traded a high of N3.55 trillion in 2007, had shown considerable slowdown over the past 12 years, dropping by 66.67 percent to N1.185 trillion in 2018.