Foreign Portfolio Inflows Rose By 180% To N344.3bn Amid Economic Volatility

Foreign portfolio inflows into Nigeria’s stock market, the Nigerian Exchange (NGX), soared to N344.30bn in the first ten months of 2024, reflecting a significant 180.95 per cent increase compared to the N122.55bn recorded in the same period in 2023.

This substantial growth, highlighted in the NGX’s Foreign Portfolio Investment (FPI) report, seen by THE WHISTLER, underscores a remarkable shift in investor activity despite persistent economic uncertainties.

However, the data reveals a contrasting trend in outflows. Foreign portfolio outflows during the same period totalled N400.04bn, exceeding inflows by 16.19 per cent.

This disparity points to an underlying crisis of confidence among foreign investors, driven by Nigeria’s volatile economic environment characterized by fluctuating exchange rates, inflationary pressures, and policy inconsistencies.

Many investors are opting to scale back their exposure to mitigate potential risks.

The report also noted the dominance of domestic transactions on the NGX. Between January and October 2024, the total value of domestic transactions reached an impressive N3.726trn, overshadowing the N744.34bn recorded from foreign transactions.

The resulting N2.98trn gap highlights a 400.57 per cent surge in domestic market activity relative to foreign participation, emphasizing the growing role of local investors in sustaining the market’s momentum.

As of October 31, 2024, total transactions at the NGX rose marginally by 1.97 per cent, climbing from N493.01bn in September to N502.73bn in October.

This marks a significant year-on-year increase of 127.54 per cent compared to October 2023, when total transactions stood at N220.94bn.

Domestic investors executed approximately 82 percent of total transactions in October, further solidifying their dominant market position.

An analysis of domestic transactions reveals contrasting trends among investor categories.

While retail transactions plummeted by 40.98 per cent from N288.10bn in September 2024 to N170.04bn in October, institutional transactions surged by 74.45 per cent, rising from N163.50bn to N285.23bn over the same period.

Institutional investors outperformed their retail counterparts by 26 per cent, signaling a growing confidence among large-scale domestic players.

Over the past decade, the performance of the Nigerian stock market has reflected declining foreign engagement.

Between 2007 and 2023, domestic transactions decreased by 10.94 per cent from N3.556trn to N3.167trn, while foreign transactions fell by a steeper 33.28 per cent from N616bn to N411bn.

By the end of 2023, domestic transactions accounted for 89 per cent of total market activity, with foreign transactions contributing a mere 11 per cent.

The current dynamics of the NGX highlight the complex interplay of local and foreign investor sentiments. While domestic participation has provided a buffer against economic headwinds, the lingering reluctance of foreign investors to deepen their involvement remains a critical challenge.

Nigeria’s economic landscape—marked by exchange rate instability, inflation, and policy uncertainty—continues to weigh heavily on investor confidence, necessitating urgent measures to foster a more stable and attractive investment environment.

As the year begins, market stakeholders will be closely monitoring these trends, particularly the impact of macroeconomic policies and reforms aimed at restoring foreign investor confidence and sustaining the momentum in domestic participation.

Foreign Portfolio Inflows Rose By 180% To N344.3bn Amid Economic Volatility is first published on The Whistler Newspaper