Domestic, Foreign Transactions In Stocks Decline To N188.9bn

The total value of domestic and foreign transactions on Nigerian Exchange (NGX) Limited in the month of February 2023 amounted to N188.91 billion, lower than N195.10 billion in January.

The Domestic and Foreign Portfolio Investment (FPI) report in February 2023 report released by NGX Regulation Limited captured these transactions as well as trading figures from market operators.

According to the report, total transactions in the local bourse declined by 3.2 per cent month-on-month to N188.91 billion in February lower than N195.10 billion achieved in January. Also, the total value of transactions executed by domestic investors outperformed transactions executed by foreign investors by 80 per cent.

A further analysis of the total transactions revealed that total domestic transactions decreased by 0.53 per cent from N170.20 billion in January to N169.29 billion in February 2023. However, total foreign transactions decreased more significantly by 21.20 per cent from N24.90 billion to N19.62 billion between January 2023 and February 2023.

The institutional investors outperformed retail investors by 58 per cent. A comparison of domestic transactions in month of February and prior month revealed that retail transactions decreased by 2.44 per cent from N35.66 billion in January to N34.79 billion in February 2023. Similarly, the

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institutional composition of the domestic market decreased by 0.03 per cent from N134.54 billion in January, 2023 to N134.50 billion in February, 2023.

It will be recalled that domestic equities outperformed global peers in the review month, delivering a 4.8 per cent month-on-month gain, while market capitalization rose by N1.40 trillion.

Capital market analysts noted that while foreign investors remain net sellers of Nigerian equities, inflows declined sharply by 62.2 per cent month-on-month to N3.68 billion, the lowest level since at least 2013 amid lingering forex liquidity constraints, election uncertainties and high global interest rates.

Analysts at Cordros Securities Limited 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.”