Foreign investors are pulling out of the Nigerian Exchange (NGX) as foreign outflows year-to-date surged to N400.04 billion, surpassing inflows of N344.30 billion by October 2024, resulting in a net withdrawal of N55.74 billion.
Data from the NGX on domestic and foreign portfolio participation in equity trading, as of October 31, revealed that foreign transactions accounted for only 16.65% of the N4.47 trillion total trading value for the first ten months of 2024. Domestic investors dominated, contributing 83.35%.
In October alone, foreign transactions grew by 14.61%, rising from N41.41 billion in September to N47.46 billion. These comprised N33.31 billion in inflows and N14.15 billion in outflows. However, foreign investors’ market activity remained minimal, representing just 9.44% of the N502.73 billion total transactions for the month, while domestic investors accounted for a significant 90.56%.
Naira Depreciation Fuels Investor Concerns
The depreciation of the naira has heightened foreign investors’ concerns. The currency weakened by 2.31% to N1690.37/$ at the National Autonomous Foreign Exchange Market, compared to N1652.25/$ weeks earlier.
Despite an increase in foreign transactions from N291.38 billion year-to-date in October 2023 to N744.34 billion in 2024, foreign participation remains significantly lower than domestic trading. Domestic investors have supported the market with contributions of N3.73 trillion year-to-date, split between retail investors (N1.91 trillion) and institutional investors (N1.82 trillion).
Brokers Weigh In
David Adonri, a broker and board member of Highcap Securities, attributed the foreign outflows to profit repatriation by investors.
“If outflows exceed inflows, it indicates that foreign investors are taking profits back to their home countries. The volatility of the naira affects investor confidence as everyone prefers to operate in a stable environment,” he said.
Adonri noted that while the departure of foreign investors reduces foreign currency supply, the strong domestic participation in the NGX will cushion the impact. He added, “The market has seen some capital appreciation in stocks, but foreign investors are no longer as dominant. Their exit will have less severe effects on the market now.”
Implications for MSMEs
For Africa’s MSMEs, particularly those considering equity or partnerships through the NGX, the trend underscores the importance of focusing on local capital sources. With domestic investors sustaining the market, opportunities exist for businesses to leverage strong domestic participation to drive growth despite currency challenges.
The NGX must, however, address lingering concerns about foreign investor confidence to maintain its appeal as a global investment destination.
