Foreign investors pulled out a total of N433.15bn from the nation’s stock market from January to November this year, compared to N481.96bn in the same period of 2019, a new report by the Nigerian Stock Exchange on Wednesday has shown.
The NSE, in its domestic and foreign portfolio report, said foreign inflows into the market fell to N226.13bn year-to-date from N 397.44bn in 2019.
Foreign portfolio investment outflow includes sales transactions or liquidation of portfolio investments through the stock market, while the FPI inflow includes purchase transactions on the NSE (equities only), according to the data.
Total transactions at the nation’s bourse increased by 29.77 percent from N244.90bn (about $634.55m) in October 2020 to N317.81bn (about $813.87m) in November 2020.
The NSE said the total value of transactions executed by domestic investors in November outperformed transactions executed by foreign investors by about 58 percent.
It said total domestic transactions increased by 53.51 percent from N163.18bn in October to N250.50bn in November.
“Total foreign transactions, however, decreased by 17.63 percent from N81.72bn (about $211.75m) in October to N67.31bn (about $172.38m) in November,” it said.
According to the report, institutional investors outperformed retail investors by 16 percent.
It said retail transactions increased by 52.10 percent from N69.94bn in October to N106.38bn in November.
“The institutional composition of the domestic market increased by 54.57 percent from N93.24bn in October 2020 to N144.12bn in November 2020.”
The total foreign transactions carried out from January to November stood at about N659.28bn, compared to total domestic transactions of N1239.62bn.
The Head of Macroeconomic Research at EFG Hermes, Mohamed Basha, said the scarcity of foreign exchange in Nigeria was making foreign investors wary of sending their money to the country.
Basha noted that Nigeria’s economy faced a very tough 2020, suffering from a double whammy of collapse in oil prices and pandemic shock, which weighed heavily on the country’s fiscal position and the real economy.
“FX shortages emerged, with a parallel market that’s trading at a +20 percent premium to official rates; fiscal space was eaten up and the economy fell into recession,” he said in a note.
He noted that inflation had accelerated to a nearly three-year high, driven mostly by food prices in a further blow to already weak purchasing power.
Basha said, “Going into 2021, we see the macroeconomic situation remaining challenging, notwithstanding some improvements.
“The recovery in oil prices to $50 per barrel already by end of 2020 and prospects for a slightly higher price in 2021 is definitely good news for the economy and should help avail more resources for both the government and the Central Bank of Nigeria.”
He, however, said despite the higher oil price, the country would still be running thin on forex liquidity, unable to replicate the more relaxed environment which existed back in 2017/18.
“Then, the market was relying on carrying trade flows – foreign flows into the local debt market – to provide excess liquidity in the system, but this trade now has low prospects of recovery, given the very low level of interest rates the country is now offering in addition to FX shortages which make foreign investors wary of sending their money to Nigeria,” he added.
The analyst noted that the Nigerian authorities had taken a number of encouraging reform measures, including the deregulation of domestic fuel prices and naira devaluation.