•May impede Nigeria’s global financial integration –Experts
By Chinwendu Obienyi
Concerns over declining foreign investments at the Nigerian Exchange Limited (NGX) have intensified as foreign investors withdrew N70.45 billion from the equities market in January and February 2025.
This has resulted in fears amongst market operators and analysts that the trend could have significant implications for Nigeria’s economic integration into global financial flows.
According to the recent Domestic and Foreign Portfolio Transactions Report published by the Nigerian Exchange Limited (NGX) for February 2025, foreign investor participation saw a much steeper drop of 40.36 per cent, plummeting from N71.51 billion ($48.38 million) in January to N42.65 billion ($28.57 million) in February.
Furthermore, foreign inflows which stood at N25.66 billion in January, dropped down to N18.05 billion, representing a 29.67 per cent decline whilst outflows decreased by 46.3 per cent from N45.85 billion which was recorded in January to N24.60 billion, representing about N70.45 billion withdrawn by foreign investors in the last two months.
This reduced foreign investors’ share of market activity to just 8.37 per cent, compared to 11.78 per cent in January, highlighting the dominance of domestic investors.
The report further highlighted the dominant role played by domestic investors, whose activity in February 2025 outpaced that of foreign investors by an overwhelming 84 per cent. A deeper analysis of investor participation in February 2025 reveals that domestic transactions accounted for the lion’s share of market activity, despite experiencing a 12.83 per cent decline from N535.54 billion in January to N466.82 billion in February.
Nigeria has faced a steady decline in foreign direct investment (FDI) due to factors like insecurity, macroeconomic instability, and high business costs. Foreign direct investments (FDI) dropped from $8.6 billion in 2009 to $1.8 billion in 2023.
Looking at historical trends, the report indicates that domestic investor participation has been on a steady upward trajectory over the last two decades. Specifically, domestic transactions grew by 33.15 per cent, rising from N3.556 trillion in 2007 to N4.735 trillion in 2024, reflecting increased confidence and participation from local investors.
During the same period, foreign transactions also saw an increase of 38.31 per cent, from N616 billion to N852 billion, though the share of foreign participation remained significantly lower compared to domestic investment. In 2024, domestic transactions accounted for 85 per cent of total market transactions, while foreign transactions contributed a mere 15 per cent.
This trend has continued into 2025, with domestic transactions totaling N1.002 trillion so far, while foreign transactions remain significantly subdued at approximately N114.16 billion.
Weighing their opinion, market operators who spoke to Daily Sun, warned that reduced foreign investment could constrain Nigeria’s ability to integrate into global financial markets, further isolating its economy.
Head, Research at FSL Securities, Victor Chiazor, explained that the outflow of foreign capital exacerbates challenges like currency depreciation, inflation, and low investor confidence.
He added that high interest rates have weakened the purchasing power of Nigerians, thereby reducing demand for goods and diminishing the profitability of businesses.
“I know the MPC has seen the effect of raising interest rates and hence, the status quo which stands currently. However, when domestic producers struggle, it sends a bad signal to potential foreign investors, who are then cautious and try to pull their money away because it is a market with free entry and free exit.
This is not to say that the FG and the CBN are not working on effective reforms but there is a need to address structural issues such as energy deficits, improve regulatory transparency, and stabilize the naira to attract sustainable foreign investments”, Chiazor said.
For their part, analysts at Cowry Research, noted the growing self-reliance of the Nigerian equities market, as local investors continue to drive market activity amid dwindling foreign participation.
“The consistent dominance of domestic investors suggests that confidence in the local bourse remains strong, even as foreign investors adopt a more cautious stance due to external uncertainties. With domestic institutional investors maintaining a significant presence, the NGX may continue to see sustained market stability, albeit with some volatility influenced by macroeconomic factors”, they said.