Foreign portfolio investment in the Nigerian equities market recorded an upbeat in February as foreign investors continued to respond positively to recent initiatives by the Central Bank on fixing foreign exchange inadequacies.
According to data published by the Nigerian Exchange Limited, foreign transactions which account for 18.4 percent of gross transactions in February 2024 increased by 23.9 percent month on month to N65.81 billion as against N53.11 billion in January 2024.
Year on year, the performance of the current month when compared to the performance in February 2023 (N188.91 billion) revealed that total transactions increased significantly by 89.44 percent.
According to the Domestic and Foreign Portfolio Report of the Nigerian Exchange, total transactions in the domestic equities market declined by 45.1 percent m/m to N357.88 billion in February (January: N651.52 billion).
Retail Investors outperformed Institutional Investors by 10 percent.
A comparison of domestic transactions in the current and prior month (January 2024) revealed that retail transactions decreased by 43.29 percent from N285.58 billion in January to N161.94 billion in February 2024. Similarly, the institutional composition of the domestic market decreased by 58.40 percent from N312.83 billion in January 2024 to N130.13 billion in February 2024.
Over a-16-year period, domestic transactions decreased by 10.94 percent from N3.556 trillion in 2007 to N3.167 trillion in 2023; whilst foreign transactions also decreased by 33.28 percent from N616 billion to N411 billion over the same period.
“The performance of the current month when compared to the performance in February 2023 (N188.91 billion) revealed that total transactions increased significantly by 89.44 percent.)”
Total domestic transactions accounted for about 89 percent of the total transactions carried out in 2023, whilst foreign transactions accounted for about 11 percent of the total transactions in the same period. The transaction data for 2024 shows that total domestic transactions are circa N890.48 billion, whilst total foreign transactions are circa N118.92 billion.
The Group Managing Director, Cowry Asset Management Limited, Johnson Chukwu, and his team of analysts in a report, highlighted that domestic investors primarily drove the decline in the review period, with domestic inflows (81.6% of market transactions) dropping by 51.2 percent m/m to N292.07 billion (January: N598.41 billion) due to investors preference for fixed income yields at current levels.
“Looking ahead, we expect domestic investors to continue to dominate market performance, though rising FI yields may constrain buying activities. At the same time, we believe the CBN’s policies around fixing FX inadequacies will continue to bolster investor confidence and encourage the continued return of foreign investors. Consequently, we expect sustained improvements in foreign participation in the short term,” Cowry hinted.
Generally, capital inflow to Nigeria is recording upbeat. In Q4 2023, according to data published by the National Bureau of Statistics early this year, total capital importation into Nigeria stood at $1,088.48 million, slightly higher than $1,060.73 million recorded in Q4 2022, indicating an increase of 2.62 percent. In comparison to the preceding quarter, capital importation rose by 66.27 percent from $654.65 million in Q3 2023.
Other Investment ranked top accounting for 54.64 percent ($594.74 million) of total capital importation in Q4 2023, followed by Portfolio Investment with 28.46% ($309.76 million) and Foreign Direct Investment (FDI) with 16.90 percent ($183.97 million). The production/manufacturing sector recorded the highest inflow with $450.11 million, representing 41.35 percent of total capital imported in Q4 2023, followed by the banking sector, valued at $283.30 million (26.03%), and financing with $135.59 million (12.46%).
Capital Importation during the reference period originated largely from the United Kingdom with $267.24 million, and recorded 24.55% share. This was followed by Mauritius with $226.18 million (20.78%) and the Netherlands with $149.93 million (13.77%). Lagos state remained the top destination in Q4 2023 with $771.68 million, accounting for 65.38% of total capital importation, followed by Abuja (FCT) with $370.80 million (34.07%) and Rivers state with $6.00 million (0.55%).
Stanbic IBTC Bank Plc received the highest capital importation into Nigeria in Q4 2023 with US$499.45 million (45.88%), followed by Citibank Nigeria Limited with $229.06 million (21.04%) and Rand Merchant Bank Plc with $85.85 (7.89%).
