Domestic, Foreign Portfolio Transactions Rise By N1.77trn In 5 Years

The total transactions by domestic and foreign investors on the Nigerian Exchange Limited increased by N1.766 trillion between April 2020 to April 2024.

Total transactions at the nation’s bourse increased from N128.67 billion recorded in April 2020 to N1.894 trillion in April 2024.

Domestic investors’ transactions rose from N75.49 billion in April 2020 to N1.560 trillion in April 2024, while foreign investors’ investment appreciated to N334.01 billion from N53.18 billion.

During the period under review, foreign investors inflow rose by N114.97 billion, while foreign investors outflow amounted to N165.86 billion.

This was contained in the NGX’s Domestic & Foreign Portfolio Investment (FPI) Report. The FPI report included transactions from nearly all custodians and capital market operators and it is widely regarded as a credible measure of FPI trend. The report uses two key indicators-inflow and outflow, to gauge foreign investors’ mood and participation in the stock market as a barometer for the economy.

Recall that in the period under review, the economy was impacted from the ravages of COVID-19, recession, FX challenges amidst other macroeconomic challenges.

Capital market analysts noted that foreign investors’ low patronage of the stock market has been attributed to scarcity of foreign exchange (FX) during the period under review. Transactions in the local bourse used to be dominated by foreign investors until 2019, when the domestic investors took over the lead.

A senior stockbroker, Tunde Oyediran, said, “it is a good thing that domestic interest is building in the market; it is really positive. This is what we have been clamouring for, where the local investors will be the drivers of the market. With a level of activities demonstrated by the domestic participation will bring some sort of credibility and relative stability in the market.”

The vice president of Highcap Securities Limited, David Adonri, said the primary market for equities, which is tied to the fundamentals of the economy, has been comatose since 2015, while capital formation is paltry, due to weak macroeconomic fundamentals of the economy.

According to him, the primary market is the essence of the capital market. It forms equity capital, which the Nigerian economy direly needs to create wealth and generate productive employment for youths.
He however said that the Banking recapitalization exercise will bring in activities to the primary market.

Adonri charged the federal government to restrategise and address current macroeconomic concerns and promote issues of national development.

Cordros Securities Limited in its report titled, ‘Nigeria in 2024: Unravelling the Tapestry: Crisis of Confidence’ said “the renewed interest in Nigerian stocks in 2023 was attributed to optimism following critical policy reforms by the new administration, particularly the liberalisation of the FX market.”

The Research Firm said “we expect domestic investors to continue to dominate the domestic equities market over the short-to-medium term, even as higher fixed income (FI) yields may constrain buying activities.

“Also, FPIs who have exhibited a lacklustre interest in domestic equities are likely to remain on the sidelines due to elevated global uncertainties, sustained FX liquidity challenges, and tightening global financing conditions.”

Coronation Asset Management Limited said “since 2015, the number of foreign investors leaving the Nigerian stock market has been increasing due to several challenges, including the existence of multiple exchange rates that affect credible price discovery, and FX scarcity, which impedes repatriation of funds.”

They noted that “although the reduction in foreign investor participation has short-term benefits in shielding Nigerian markets from global economic downturns that drive capital flight across global markets, the long-term consequences are far-reaching. We do not expect a recovery in foreign participation in our markets until a solution to the issues of multiple exchange rates and FX shortages is found.”