Portfolio investments evade Nigeria as stock market posts N676.53bn turnover

Portfolio investments evade Nigeria as stock market posts N676.53bn turnover

Portfolio investments evade Nigeria as stock market posts N676.53bn turnover


 

 

The waning appetite of foreign investors in the Nigerian equities market is fast fading to insignificance with a deeper dip during the first quarter of this year, leaving their local counterparts to dominate transactions during the period.

According to the latest portfolio investment data obtained from the Nigerian Exchange Limited, the stock market recorded an aggregate turnover of N676.53 billion in the quarter under review, higher by 7.92 per cent than N626.87 billion posted in the same period of 2020.

Of the total amount, portfolio investment by expatriates represents just 22.21 per cent or N150.23 per cent. This is far below 40.18 per cent of the market share they controlled in the first quarter of last.

On the contrary, domestic investors held 77.79 per cent share of transactions in the period which amounted to N526.30 billion.

The data analysed by Business Metrics shows that local investors are waxing stronger to withdraw control of the local equities market from foreigners, given that as at Q1 of 2020, they only controlled 59.82 per cent of investment trading at the bourse.

Further analysis of expatriates’ activities showed a lopsided flow of capital in favour of repatriation of foreign funds from the local economy at the expense of inflow.

Specifically, of total N150.23 billion shares traded by foreigners in Nigeria in January, February and March this year, a lion share of N90.12 billion left the country and N60.11 billion came as capital inflow.

When in January they traded N47.52 billion, N16.73 billion was recorded as inflow against an outflow of N30.79 billion. The trend continued in February with N23.02 billion and N39.05 billion as inflow and outflow respectively.

However, the aggressive thirst for repatriation subsided in March with N20.36 billion inflow against N20.28 billion outflow.

Nonetheless, this still means that almost the same amount of the much-needed offshore capital that came into the economy through the capital market escaped the country via the same channel in the month.

In respect of domestic investors, institutional investors dominated investment deals in the period under review, albeit with their retail counterparts outperforming them in the month of March.

At the end of the quarter, domestic retail investors pushed N229.79 billion worth of share trades accumulated from N67.44 billion, N53.80 billion and N108.55 billion in January, February and March in that order.

On the flip side, deals by domestic institutional investors amounted to N269.51 billion recorded from their N117.50 billion, N99.71 billion and N79.30 billion trade values in January, February and March respectively.

Comments

The then Chief Executive Officer, NSE, Oscar Onyema, at the 2020 Market Recap and 2021 Outlook in January, noted that for the second consecutive year, equity market transactions were dominated by domestic investors who accounted for 65.28 per cent of market turnover by value while foreign portfolio investors accounted for 34.72 per cent.

Ambrose Omordion, a capital market expert, explained that the current domination of the domestics stock market by local investors is a welcomed development.

Omordion said the trend allows for investment planning in the market, adding “domestic investors have nowhere to go even in times of crises unlike their foreign counterparts who pull of the market at any given opportunity and leave negative trails.”

Explaining the reason behind exodus of foreign investors over the years, he said this can be blamed on the current foreign exchange regime in Nigeria which lacks uniformity; scarce forex supply that makes repatriation a herculean task for expatriates and global oil price that has direct impact on the Nigerian economy.