Participation of foreign investors in the Nigerian economy through the country’s stock market has further faded in the first quarter of the year spanning January to March, 2022 during which the market recorded a turnover of N692.2 billion.
On a monthly basis, the Nigerian Exchange Limited (NGX) polls trading figures from market operators on their Domestic and Foreign Portfolio Investment (FPI) flows, which on the one hand reflects general activity level of the market and on the other, shows distribution of investment activities between local investors and their foreign counterparts.
Business Metrics gathered through the latest FPI report of the domestic bourse that foreign investors’ interest in the local equity market dwindled to a paltry N128.91 billion representing 18.62%, compared to N150.23 billion or 22.21% in the first quarter of 2021.
With the evident exodus of the expatriates from the market over the years, local counterparts have continued to take positions to dominate share trading in Nigeria.
According to the latest data, domestic investors, comprising retail and institutional investors, were responsible for N563.29 billion or 79.56% of the three-month total turnover. Their domination of the market increased from N526.30 billion or 77.79% in the comparative quarter of 2021.
Further analysis of the market by this Newspaper revealed that of the N128.91 billion trade value performed by the cautious expatriates, just N55.33 billion was inflow into the country while they withdrew N73.58 billion from the economy, thus leaving a net outflow of N18.25 billion.
Recall that similar pattern manifested throughout 2021 when the local bourse recorded a turnover of N1.89 trillion but only N434.5 billion, accounting for 22.9% of the aggregate turnover in the reference period was contributed by the expatriates.
Reasons for the exodus
Capital market experts have attributed the fading appetites of foreign investors in the local stock market partly to chronic shortage of foreign exchange that often puts them on long queues whenever it is time to repatriate their funds.
According to market observers, the process could take months, and portfolio investors consider this a waste of valuable investment time.
They have similarly ascribed the falling participation of the foreign traders to the continuous depreciation of naira against the greenback, such that profits expatriates make on every dollar they invested is easily eroded at the point of repatriation, leaving them with losses.
To put this in perspective, Business Metrics can report that naira, Nigeria’s local currency, has depreciated by over 209 per cent in the past six years and unless the profit made on a dollar invested in the country within the period can make up for such huge depreciation and the biting inflationary pressure in the country, repatriation of the dollar would be at a loss.
Compounding the situation also are socio-political challenges such as insecurity, banditry, attacks on businesses and public assets, while the forthcoming generation election in 2023 is also turning off foreign investors, with rife speculations that it could further push the economy to the edge.
How investors traded in March
Transactions in stocks in March at the nation’s bourse increased by 0.93% from N183.56billion ($441.61million) in February 2022 to N185.26billion ($445.25million) in March 2022.
The performance of the current month when compared to N228.49 billion in March 2021 revealed that total transactions decreased by 18.92%.
In March 2022, the total value of transactions executed by Domestic Investors outperformed transactions executed by Foreign Investors by circa 54%.
A further analysis of the total transactions executed between the current and prior month of February 2022 revealed that total domestic transactions increased by 3.59% from N138.13 billion in February to N143.09 billion in March 2022.
In contrast, total foreign transactions decreased by 7.17% from N45.43 billion ($109.30 million) to N42.17 billion ($101.36 million) between February 2022 and March 2022.
Data obtained by Business Metrics showed that Institutional Investors outperformed Retail Investors by 16% during the month under review.
A comparison of domestic transactions in the current and prior month of February 2022 also revealed that retail transactions decreased by 1.27% from N61.39 billion in February 2022 to N60.61 billion in March 2022.
However, the institutional composition of the domestic market increased by 7.48% from N76.74 billion in February 2022 to N82.48 billion in March 2022.
