Foreign investors exit N420bn amid reforms, FX volatility

Foreign investors withdrew a staggering N420.37 billion from Nigeria’s equities market in the first quarter of 2025, marking a 251 per cent increase in capital outflows compared to the N119.81 billion recorded in the first quarter of 2024.

Despite an increase in foreign inflows—which rose 322 per cent year-on-year to N393.68 billion—the quarter closed with a net capital deficit of N26.69 billion.

Analysts warn that while headline figures may suggest renewed foreign interest, the underlying data paints a picture of cautious, often speculative, investor behavior.

“These aren’t the kind of flows you want if you’re looking for stability,” said Dr. Ayodeji Ebo, a financial economist. “We’re seeing a lot of round-tripping—capital moving in and out rapidly. It’s a sign that foreign investors are not yet confident in Nigeria’s long-term policy trajectory.”

Foreign participation in the market exploded in March, with transactions totaling N699.89 billion—a 1,541 per cent jump from February’s N42.65 billion.

For the first time in over a year, foreign investors dominated market activity, accounting for 62.74 per cent of the month’s N1.115 trillion in total trade value.

That figure dwarfed February (8.37 per cent) and January (11.78 per cent) shares, thanks largely to a surge in block trades, which are large, privately negotiated deals typically executed by institutional players.

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The near-equal split between foreign inflows (N349.97 billion) and outflows (N349.92 billion) in March suggests much of the activity was liquidity-driven rather than based on fundamental investment confidence.

“This kind of one-for-one trade activity hints at hedging strategies or speculative arbitrage, especially given the forex instability,” explained Olumide Popoola, Head of Research at an investment firm in Lagos. “We’re not seeing long-term equity bets; we’re seeing nimble, tactical positioning.”

While foreign flows surged, domestic investor activity declined. March saw a 10.98 per cent fall in domestic transactions to N415.62 billion, reversing the trend from January (N535.54 billion) and February (N466.82 billion).

“Local players are likely wary of both inflation and currency volatility,” said Bimpe Oyekanmi, a Lagos-based portfolio strategist. “While foreigners are dipping in for quick gains, Nigerian investors are taking a wait-and-see approach.”

Between 2007 and 2024, domestic investors consistently led market activity, with local transaction volumes growing from N3.556 trillion to N4.735 trillion.

In contrast, foreign investor activity rose more modestly, from N616 billion to N852 billion. However, March 2025 may signal a shift.

Of the N2.232 trillion in total market transactions in the first quarter of 2025, 36.47 per cent (N814.05 billion) came from foreign participants, up sharply from 13.77 per cent in the first quarter of 2024.

This changing ratio reflects an increasingly reactive market tied to global investor sentiment and Nigeria’s macroeconomic signals.

“We might be witnessing speculative capital flows—investors entering when the naira strengthens briefly and exiting as soon as it begins to weaken again,” noted Ebo. “It’s a dangerous cycle that could increase market fragility.”

“Reforms have made Nigerian assets look attractive on paper, but without follow-through, especially on forex stability and inflation control, the interest won’t last,” said Popoola.