Domestic, Foreign Transactions In Stocks Hit N2.3trn In 2022

The total value of domestic and foreign transactions on Nigerian Exchange (NGX) Limited amounted to N2.324 trillion in the year 2022.

The Domestic and Foreign Portfolio Investment (FPI) in December 2022 report released by NGX Regulation Limited captured these transactions as well as trading figures from market operators.

Also, the domestic investors have continued to dominate the market despite rising inflation and volatility in the foreign exchange market which remained key drivers of the Foreign portfolio investments (FPIs).

The report showed the total transactions by both domestic and foreign investors increased by 22.38 per cent to N2.324 trillion as against N1.899 trillion achieved in the previous year of 2021.

Total domestic transactions accounted for about 84 per cent of the total transactions carried out in 2022, whilst foreign transactions accounted for about 16 per cent of the total transactions in the same period. The transaction data for 2022 shows that total domestic transactions are circa N1.945 trillion, whilst total foreign transactions are circa N379.23 billion.

Analysis of domestic transactions showed that institutional investors outperformed retail investors. The retail transactions increased by 11.18 per cent year-on-year to N642.73 billion in 2022 compared to N578.12 billion recorded in 2021.

Similarly, the institutional composition of the domestic market recorded N1.302 trillion transactions in 2022, a 46.8 per cent growth, higher than N886.61 trillion in 2021.

The performance of equities market in 2022 was broadly positive as NGX All-Share Index (ASI), went up by 19.98 per cent to close on December 30, 2022 at 51,251.06 points from 42,716.44 points at which it opened trading for the year. Similarly, market capitalisation for the period gained by N5.618 trillion to N27.198 trillion on December 28, 2022 from N22.297 trillion.

Capital market analysts noted that the increment in the domestic investors transactions on the Exchange, while uncertainty in the yield environment and sustained foreign exchange (FX) illiquidity worsened foreign investors’ interest in the equities market.

Head of Investment Research, Parthian Securities, Oluwaseun Dosunmu said the dominance of domestic investors in the Nigerian equities market is a good development because it shields the market from the impacts of funds outflow from emerging markets and global headwinds.

A stockbroker, Mr. 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.”

Analyst at Cowry Asset Management Limited noted that, foreign investors have remained on the side lines amid greater uncertainty over Nigeria’s foreign exchange rate outlook despite improved financial performance of quoted corporates.

On insights for the Nigerian Exchange in 2023, chairman of the Association of Securities Dealing Houses of Nigeria (ASHON), Mr Sam Onukwe said: “the continued increase in interest rates will further affect the stock market as investors will turn to higher yields investible instruments, while the Oil and Gas industry will continue to thrive with the expected increase in international oil price.”

He added that the banking sector in Nigeria will continue to flourish, saying that the growth of electronic transactions would further improve bottom lines.

According to him, the FMCG industry may struggle due to persistent inflation, and the reduction in purchasing power of consumers. Foreign Portfolio Managers and Investors will maintain a ‘wait and see’ until after the 2023 elections.