Foreign portfolio investors retreat from NGX as inflows fall to N16bn

Onome Amuge

Nigeria’s foreign capital inflows continue to take a hit as investors grow increasingly concerned about their funds being trapped due to the country’s persistent foreign currency shortages, especially the dollar. According to data from the Nigerian Exchange, foreign investment in the Nigerian Exchange fell by 9.73 per cent in January 2024, reaching just N15.78 billion compared to N17.48 billion in December 2023.

The latest domestic and foreign portfolio investment report of the Nigerian Exchange, showed that foreign transactions rose by 10.95 percent year-on-year, with total foreign transactions increasing from N47.87 billion in December 2023 to N53.11 billion in January 2024. However, the report noted that this increase was largely due to a rise in foreign outflows, which increased from N30.39 billion in December 2023 to N37.33 billion in January 2024.

Some industry experts had anticipated a rise in foreign investment following the implementation of the twin policies of fuel subsidy removal and foreign exchange market harmonisation. However, the expected inflow of capital has yet to materialise, as the rising interest rates and inflationary pressures are seen to be deterring foreign investors. 

A comprehensive review of domestic and foreign portfolio investment figures from market operators showed that total transactions at the Nigerian Exchange increased by 89.45 percent from N343.90 billion in December 2023 to N651.52 billion in January 2024.

The total value of transactions executed by domestic investors in February 2024 was significantly higher than that of January 2023, with an increase of 233.94 per cent. Additionally, the total value of transactions executed by domestic investors far exceeded those executed by foreign investors in February, by approximately 84 per cent.

The total value of domestic transactions rose by 102.15 per cent from N296.03 billion in January 2023 to N598.41 billion in December 2023, as per the detailed breakdown of domestic transactions.

The report further disclosed that institutional investors outperformed retail investors by four percent in February 2023. A comparison of domestic transactions for the current and previous month (December 2023) indicated that retail transactions increased by 211.73 per cent from N91.61 billion in December to N285.58 billion in January 2024. In a similar fashion, the institutional segment of the domestic market increased by 53.03 percent from N204.42 billion in December 2023 to N312.83 billion in January 2024.

Data for the year 2023 showed that domestic transactions accounted for about 89 percent of the total transactions, while foreign transactions accounted for about 11 percent. Specifically, total domestic transactions were valued at N598.41 billion, while total foreign transactions were valued at N53.11 billion. This reflects the increasing level of domestic participation in the Nigerian capital market and the growing interest in domestic assets.

It is worth noting that despite the overall increase in domestic transactions, the ratio of domestic to foreign transactions has decreased slightly compared to last year, where domestic transactions accounted for about 90 percent of total transactions.