Nigerian Stocks No Longer Attractive to Offshore Investors as FX Crisis Lingers

By Aduragbemi Omiyale

Domestic investors have now taken full control of the Nigerian Exchange (NGX) Limited, outclassing their foreign portfolio investors (FPIs) counterparts.

In the past seven months, local investors have completed trades worth N1.490 trillion, while offshore investors have only managed transactions worth N273.16 billion in the period under consideration as Nigerian stocks are no longer attractive to them.

According to the Domestic and Foreign Portfolio Investment (FPI) July 2022 report which captured these transactions as well as trading figures from market operators, domestic transactions stood at N1.465 trillion in the first seven months of 2021 while foreign transactions stood at N435 billion in the same period.

This meant that total domestic transactions on the NGX grew by 1.70 per cent while foreign transactions dropped by 37.24 per cent.

Although, the July report revealed that total transactions at the nation’s bourse decreased by 35.36 per cent from N156.52 billion (about $371.53 million) in June 2022 to N101.18 billion (about $236.86 million) in July 2022, the performance of the current month, however, when compared to the performance in July 2021 (N89.77 billion), total transactions increased by 12.71 per cent.

Furthermore, the total value of transactions executed by domestic investors outperformed transactions executed by foreign investors by 42 per cent while domestic inflows and outflows stood at N36.97 billion and N34.53 billion respectively, in the month of July 2022.

On the flip side, foreign inflows recorded N13.68 billion while foreign outflows stood at N16 billion. This decline, according to analysts, is due to the scarcity of FX currently bedevilling the economy.

Since the outbreak of COVID-19, inflows across capital importation, loans, diaspora remittances, exports, income from investments and other autonomous sources have been dwindling.

However, domestic investors have continued to hold their ground on the floor of the NGX despite rising inflation and currency volatility in the foreign exchange market, which remained key drivers of domestic & foreign portfolio investment.

Over a 15-year period, domestic transactions had decreased by 58.80 per cent from N3.556 trillion in 2007 to N1.465 trillion in 2021 whilst foreign transactions also decreased by 29.38 per cent from N616 billion to N435 billion over the same period.

On the other hand, total domestic transactions accounted for about 77 per cent of the total transactions carried out in 2021, whilst foreign transactions accounted for about 23 per cent of the total transactions in the same period.