Foreign traders withdrew N455.62bn from the Nigerian inventory market in 2024, considerably outpacing complete inflows and reinforcing issues about investor confidence regardless of the Central Bank of Nigeria’s efforts to stabilise the naira.
Industry specialists attributed this to the volatility of the naira, stressing that it created uncertainties and that inflation additionally induced a blurry future for overseas traders.
Data from the Nigerian Exchange Limited’s Domestic and Foreign Portfolio Investment Report confirmed that whereas overseas transactions for the yr amounted to N852.03bn, outflows accounted for 53.47 per cent, as inflows stood at N396.41bn, additional highlighting the exit of overseas traders from the Nigerian capital market.
The report revealed that overseas participation within the Nigerian inventory market remained comparatively low, accounting for 15.25 per cent of complete transactions, whereas home traders dominated with N4.73tn, representing 84.75 per cent.
The imbalance in participation between home and overseas traders displays a broader development noticed in recent times, with overseas gamers decreasing their publicity to Nigerian equities amid financial uncertainties and capital management issues.
Foreign outflows different considerably all through 2024, reflecting shifts in investor sentiment. In January, overseas traders withdrew N37.33bn, whereas inflows stood at N15.78bn, resulting in a internet outflow of N21.55bn.
The development continued in February, with outflows rising to N40.88bn, and inflows growing to N24.93bn, narrowing the web outflow to N15.95bn. In March, inflows surged to N52.66bn, outpacing outflows of N41.60bn, making it the primary month in 2024 the place overseas funding within the inventory market exceeded exits.
By April, overseas traders accelerated their withdrawals, with outflows leaping to N78.25bn, whereas inflows stood at N42.58bn, resulting in a internet outflow of N35.67bn, the most important recorded in 2024.
In May, the outflows remained excessive at N69.41bn, whereas inflows elevated to N54.87bn, leading to a internet outflow of N14.54bn.
In June, outflows declined to N43.94bn, whereas inflows fell to N38.25bn, leaving a internet outflow of N5.69bn.
The second half of the yr noticed decrease outflows in some months however didn’t end in sustained overseas confidence available in the market. In July, overseas outflows dropped to N19.95bn, the bottom recorded within the yr, whereas inflows additionally declined to N37.57bn, resulting in a internet influx of N17.62bn.
In August, outflows elevated barely to N24.38bn, whereas inflows dropped to N33.09bn, leading to one other internet influx of N8.71bn. However, the development reversed in September as outflows climbed again to N30.15bn, whereas inflows sharply declined to N11.26bn, resulting in a internet outflow of N18.89bn.
Foreign exits slowed in October, with outflows declining to N14.15bn, whereas inflows stood at N33.31bn, making a internet influx of N19.16bn. The development of internet inflows continued in November, with overseas withdrawals rising barely to N15.09bn, whereas inflows dropped to N25.85bn, leading to a internet influx of N10.76bn.
However, December noticed a return to excessive outflows, as overseas traders pulled out N40.49bn, whereas inflows had been N26.26bn, resulting in a internet outflow of N14.23bn. Overall, complete overseas outflows for 2024 reached N455.62bn, exceeding inflows of N396.41bn by N59.21bn.
Foreign withdrawals surpassed inflows in seven out of 12 months, reflecting unstable confidence amongst overseas traders. Despite the upper outflows, overseas participation available in the market improved in comparison with 2023, when complete overseas transactions stood at N410.62bn.
The 107.54 per cent improve in overseas exercise means that whereas traders had been engaged available in the market, they primarily used alternatives to exit fairly than reinvest in Nigerian equities.
The dominance of home traders continued in 2024, accounting for 84.75 per cent of complete market transactions.
Domestic transactions reached N4.735tn, greater than 5 occasions the full overseas transaction worth. A breakdown of home participation confirmed that retail traders accounted for N2.306tn, representing 48.72 per cent of complete home trades, whereas institutional traders led with N2.429tn, or 51.28 per cent.
Institutional traders performed a essential position in market stability, with their participation growing by 18.63 per cent year-on-year, whereas retail investor exercise grew by 11.57 per cent.
The knowledge additionally confirmed vital shifts in institutional involvement, significantly in December, when home institutional transactions surged by 97.09 per cent, from N206.02bn in November to N406.04bn in December, reflecting renewed confidence amongst giant traders.
Retail transactions, in distinction, noticed solely a 2.81 per cent improve over the identical interval. The Nigerian inventory market recorded complete transactions of N5.587tn for 2024, representing a 56.2 per cent improve from N3.578tn in 2023.
This progress was largely pushed by elevated home exercise, significantly from institutional traders. A month-on-month evaluation confirmed that complete transactions in December 2024 rose by 52.29 per cent, from N442.34bn in November to N673.66bn, on account of a 51.20 per cent improve in home transactions from N401.40bn to N606.91bn and a 63.04 per cent improve in overseas transactions from N40.94bn to N66.75bn.
Compared to December 2023, transactions in December 2024 had been up by 95.88 per cent, indicating a pointy rise in market exercise.
The report learn partly, “An additional evaluation of the full transactions executed between the present and prior month (November 2024) revealed that complete home transactions elevated by 51.20 per cent from N401.40bn in November 2024 to N606.91bn in December 2024.
“Similarly, total foreign transactions increased by 63.04 per cent from N40.94bn (about $24.61m) to N66.75bn (about $43.47m) between November 2024 and December 2024.”
Despite persistent overseas outflows, the alternate price confirmed relative stability, attributed to the CBN’s financial insurance policies. The naira strengthened from N1,663.39/$ in November 2024 to N1,535.81/$ in December 2024, marking a 7.67 per cent appreciation.
However, the improved alternate price didn’t instantly translate into larger overseas funding, as traders remained cautious on account of issues over inflation, financial coverage changes, and capital repatriation.
The PUNCH earlier reported that overseas traders withdrew N45.85bn from the Nigerian inventory market in January 2025, an outflow that considerably overshadowed the N25.66bn recorded as overseas inflows throughout the identical interval.
The newest Nigerian Exchange Domestic and Foreign Portfolio Investment Report revealed that overseas outflows accounted for 64.12 per cent of complete overseas transactions on the alternate, reinforcing issues over declining overseas participation available in the market regardless of the relative stability of the naira.
It confirmed that complete overseas transactions elevated by 7.13 per cent, rising from N66.75bn in December 2024 to N71.51bn in January 2025. However, this improve was largely pushed by traders liquidating their holdings, as evidenced by the a lot bigger outflow in comparison with inflows.
This development signifies that whereas some overseas traders should still have interaction with the Nigerian market, a better proportion choose to exit, contributing to capital flight.
The withdrawal of overseas funds from the market got here amid a 9.89 per cent decline in complete fairness transactions on the NGX, which fell from N673.66bn in December 2024 to N607.05bn in January 2025.
On a year-on-year foundation, complete transactions dropped by 6.83 per cent from N651.52bn recorded in January 2024. This means that investor sentiment remained subdued as each overseas and home gamers exercised warning in response to prevailing financial situations.
Experts have beforehand famous that sustained coverage consistency, improved capital market regulation, and clear FX repatriation frameworks shall be important in attracting overseas traders again to Nigerian equities.
Experts react
When contacted, the Chief Executive Officer of Cowry Treasurers Limited, Charles Sanni, defined that overseas traders usually herald funds of their currencies and that the naira’s volatility had created uncertainties.
“Inflation created a blurry future for them. The expectation was that Nigeria would make money, but because of the volatility of the naira, it wasn’t stable, so they had to decide whether to continue investing. The NGX performance was fine, but it was eroded by foreign losses,” Sanni famous.
He expressed optimism about potential enhancements within the coming months. However, he highlighted issues over excessive home rates of interest and their affect on company margins.
“If domestic interest rates remain high, the cost of funds for companies will rise, and their margins will thin out over time. Our credit system is not robust enough, and interest rates are already too high,” he said.
Sanni warned that the scenario displays a insecurity within the economic system, which might finally result in investor fatigue. “The government needs to manage inflation, stabilize the naira at around N1,200 per dollar, and ensure no crisis in Rivers State. There should also be more transparency in financial reporting,” he suggested.
Also commenting on the problem, the Managing Director of Highcap Securities, David Adonri, said that Foreign traders within the Nigerian capital market stay cautious on account of issues over sovereign danger, profitability, and liquidity,
Adonri famous that whereas traders will not be utterly exiting the market, some are repatriating earnings or decreasing their publicity to the debt market on account of declining rates of interest.
“Perhaps they are not satisfied with the country’s sovereign risk. However, they are not leaving but may just be adjusting their positions. There may also be the perception that equities are at their peak and due for harvesting,” he said.
Despite these issues, Adonri expressed optimism about improved overseas investor confidence, significantly following the Central Bank of Nigeria’s settlement of most trapped funds. He additionally highlighted key reforms that might appeal to extra overseas participation.
“The Nigerian capital market is inundated with hedging futures to manage currency risks. There is no more capital control, so foreign investors can now enjoy free entry and free exit of capital. These are measures capable of boosting foreign investor confidence,” he added.
An economist and funding specialist, Vincent Nwani instructed The PUNCH that Foreign participation within the Nigerian inventory market remained weak within the full yr to December 2024, standing at 16 per cent an enchancment from 10 per cent in 2023, but nonetheless considerably low.
Nwani attributed the development to a persistent lack of investor confidence and overseas alternate challenges. “When the multinationals left the country, it might have been one of the reasons why they left. Foreign investors cannot bring in their money that must have informed this decision,” he stated.
While some might argue that Nigerian traders are filling the hole left by overseas traders, Nwani cautioned towards viewing the scenario solely from an emotional perspective.
“In the London Stock Exchange, domestic investors don’t even control up to 59 per cent. The stock market is international, and on the flip side, it shouldn’t be like this. The focus should be on ensuring a stable foreign exchange rate,” he added.
