- Macroeconomic volatility driving capital flight, investor confidence drops
- Experts urge policymakers to implement stable fiscal, monetary policies
Foreign investors pulled over N450bn from the Nigerian Exchange in 2024, marking a 93.21 percent increase from the over N230bn recorded in 2023.
This significant capital flight surpassed foreign inflows, raising concerns about investor confidence in Nigeria’s economic stability.
According to the NGX Foreign Portfolio Investment report obtained by The Point, foreign portfolio inflows surged by 126.78 percent to N396.41bn in 2024, up from N174.8bn in 2023.
However, outflows exceeded inflows by 14.94 per cent, signaling continued uncertainty in Nigeria’s investment climate.
The increase in foreign divestment is largely attributed to macroeconomic instability, including exchange rate fluctuations, inflation, and inconsistent fiscal and monetary policies.
These factors, according to experts, have heightened investor uncertainty, prompting a reduction in exposure to the Nigerian market.
By December 31, 2024, total transactions on the NGX rose by 52.29 per cent, jumping from N442.34bn ($265.93m) in November to N673.66bn ($438.64m) in December.
Year-on-year, market activity grew by 95.88 per cent from N343.92bn in December 2023.
However, foreign investors remained cautious, with domestic investors accounting for 80 per cent of total transactions.
Domestic market activity increased by 51.20 percent, rising from N401.40bn in November to N606.91bn in December. Foreign transactions, meanwhile, grew by 63.04 per cent, reaching N66.75bn ($43.47m) in December, up from N40.94bn ($24.61m) in November.
Despite the overall rise in market participation, the gap between foreign inflows and outflows remains a concern, reflecting persistent skepticism about Nigeria’s economic landscape.
Institutional investors dominated trading, outpacing retail investors by 34 per cent. Institutional transactions surged by 97.09 per cent, from N206.02bn in November to N406.04bn in December, while retail activity recorded a modest 2.81 per cent increase to N200.87bn in December.
Over the past 18 years (2007–2024), data revealed that domestic transactions grew 33.15 per cent, from N3.556trn to N4.735trn, while foreign transactions increased by 38.31 percent from N616bn to N852bn.
By 2024, foreign participation dropped to just 15 percent of total market activity compared to 85 percent by domestic investors.
Despite rising foreign inflows, the persistent capital flight underscores Nigeria’s investment challenges.
For instance, exchange rate volatility, inflation, and inconsistent policies continue to deter long-term foreign investment.
To restore investor confidence, experts said that Nigerian policymakers must implement clear and stable fiscal and monetary policies.
An Abuja-based Developmental Economist, Afeez Agbola, told The Point that prioritizing currency stability, economic transparency and investor-friendly policies will be critical to reversing the decline in foreign participation and fostering sustainable growth in Nigeria’s financial markets.