Domestic investors back in Nigeria’s equities market, account for 54% of total trade in H1 2017

They are back! Nigerian domestic investors who, beaten by the 2008 bug of the financial crisis that engulfed the Nigerian capital markets and stayed away for years to leak their wounds, have made a steady comeback to the market, evidence from a Nigerian Stock Exchange market analysis strongly show.

According to the market analysis for the first half of 2017 domestic investors accounted for 54 percent of participation in equity trading for the period as against 46 percent by foreign portfolio investors.

The analysis specifically showed that total domestic transactions increased to N505 billion as at end-June, while foreign portfolio transactions stood at N430.23 billion.

Year-on-year local transactions increased by 42.19 percent from N355.19 billion to N505.03 billion, while total FPI transactions increased by 59.81 percent from N269.22 billion to N430.23 billion.

Market analysts and portfolio managers say the increased domestic participation indicates that more and more Nigerians are betting on the market due to some positive policy stance of the government, including the investors and exporters foreign exchange window and favourable economic data that have seen inflation decelerate.

Some other see the recent surge in Nigeria’s stock indices continuing for a long while since the foreign/domestic split of participation in the market suggests that the risk of off-shore players taking their funds and leaving the market bereft has been minimized.

“The foreign/domestic split is not radically different from 2016 and does not suggest a pattern of the offshore players taking their profits and the local institutions taking their place,” according to analysts at FBNQuest, the investment and research arm of First Bank of Nigeria.

They said the surge in the market in just three months has not been a stampede, that turnover year-to-date has averaged just US$12.8m equivalent at the interbank rate, and US$21.5m since the watershed on 09 May, adding that the market was still in negative territory ytd as recently as 09 May but has since soared, driven largely by the response of the offshore portfolio community to the CBN’s new fx window for investors and exporters (NAFEX).

Similarly, the current Q2 reporting season has brought some strong results from non-banks, which has boosted positive sentiments about the market.

“We should watch closely for the forthcoming Q2 results for the leading banks. If these perform ahead of market expectations, the surge may well have further legs. The large offshore investment houses, which have been deterred by the workings of NAFEX could be persuaded to join the party,” they pointed out.

They equally noted that the Nigerian equities market has gained 39.6 percent year-to-date, compared with 19.8 percent for Nairobi and 10.5 percent for Jo’burg exchanges.