By Adedapo Adesanya
Some foreign portfolio investors who exited the stock market in Nigeria in February and March 2020 are gradually making a comeback.
It was initially feared in the first quarter of the year that the Nigerian Stock Exchange (NSE) will be badly affected by the coronavirus pandemic and this made some investors to sell-off their holdings.
Apart from the COVID-19 scare during the period, offshore investors, sensing a liquidity crisis in the foreign exchange market in the country due to a crash in the price of crude oil, which is Nigeria’s main source of income, had to sell their investments in the country to jump out of the economy, especially after the Central Bank of Nigeria (CBN) adjusted the Naira to N360/$1 from N306/$1.
According to data released by the NSE this week and analysed by Business Post, the outflow from the FPIs in February and March confirmed the panic in the period.
In January 2020, offshore investors pulled out N46.5 billion from the market and the next month, it rose to N52.4 billion and then N87.7 billion in March.
In terms of inflow from the FPIs, in January, it stood at N23.8 billion. It dropped to N19.0 billion the next month and rose to N22.5 billion in March.
In April 2020, when the lockdown imposed on Lagos, Abuja and Ogun State became effective, against all odds, the stock market witnessed growth and this was caused by the participation of domestic investors in the market, attracting more investments in equities, though trading was done remotely.
In fact, some offshore investors, who had earlier left the capital market but could not repatriate their funds because of the FX liquidity crisis, were forced to reinvest in the market and this caused the bullish run witnessed in April and May.
According to data from the NSE, the total value of trades in April and May; N128.7 billion and N119.2 billion respectively, had domestic transactions contributing chiefly to them; 58.67 per cent domestic versus 53.18 per cent in April and 70.42 per cent domestic versus 35.24 per cent in May.
Business Post observed that though domestic transactions have continued to dominate in the past few months unlike in the past, offshore investors are beginning to make their way back into the market and this was confirmed in the value of transactions in July and August 2020.
In July, the stock market recorded N13.7 billion inflow from FPIs and in August, it increased to N17.7 billion, while outflow in July dropped to N20.9 billion from N31.1 billion in June and stood at N21.3 billion last month.
According to the NSE, the total value of transactions in August dropped 8.49 per cent to N94.45 billion from N103.21 billion, with domestic investors contributing 58.73 per cent to the trades and FPIs accounting for 41.27 per cent.
So far this year, transactions worth N1.2 trillion have been carried out at the stock market, lower than N1.3 trillion recorded in the same period of last year.
Modupe Gbadeyanka