N187bn portfolio investment escape Nigeria via NSE in Q1
- As domestic investors dominate trading activities
By Omobayo Azeez
The Nigerian economy was ejected of N186.6 billio worth portfolio investment through the Nigerian Stock Exchange (NSE) in the first quarter (Q1) of 2020.
This further underscores the struggle of the country to attract and retain foreign investment for its economic prosperity.
Foreign portfolio investment is the entry of funds into a country where foreigners deposit money in a country’s bank or make purchases in the country’s stock and bond markets, sometimes for speculation.Portfolio investments are held directly by an investor or managed by financial professionals.
According to latest data obtained by business A.M from the NSE, total transactions by foreign investors at the exchange within the period under review stood at N251.87 billion, representing 40.18 per cent of N626.87 billion, while domestic investors pushed stocks worth N374.98 billion, equivalent to 59.82 per cent of the total.
The apathy of the expatriates in the local stock market as their capital outflow outweighed inflow during the period.
Specifically, outflow in January stood at N46.6 billion as against N23.81 billion inflow in the month; N52.37 billion outflow versus N18.97 billion inflow in February; and N87.73 billion ejected from the market in March as against N22.49 billion that came in the month of March.
The first quarter of this year recorded an aggregate of N65.27 billion inflow in contrast with N97.63 billion in the comparative period of 2019; while total investment repatriated within the period stood at N186.6 billion compared with N124.24 billion in Q1’ 2019.
According to the latest data, the value of domestic transactions executed by institutional investors outperformed retail investors by 10 per cent.
Meanwhile, a comparison of domestic transactions in the current and prior month, February 2020, revealed that retail transactions increased significantly by 103.72 per cent from N29.56 billion in February 2020 to N60.22 billion in March 2020
Similarly, the institutional composition of the domestic market increased by 52.23 per cent from N47.60 billion in February 2020 to N72.46 billion in March 2020.
Commenting on the trend, Malam Garba Kurfi, managing director of APT Securities Limited said the exodus of the portfolio investors from the domestic market was fueled by fears rising from falling oil price in the international market and the attendant depletion of the Nigeria’s foreign reserves.
According to him, this portend looming devaluation of the naira, the local currency, therefore forcing the investors to seek escape before FOREX became acutely scarce.
This contributed to the massive loss recorded in the period in the valuation of total equities on the bourse which closed the Q1 with an approximated loss of N2 trillion due to sell-offs
The APT boss however noted that majority of the expatriates eventually returned to the market to take position on undervalued stocks with sound fundamentals, liquidity and good dividend yields after they could not finish the process of repatriating their funds from the country due to lockdown and shortage of dollar.