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By Chinwendu Obienyi
Despite the bearish condition of Nigeria’s economy, domestic transactions continued its ascent at the floor of the Nigerian Exchange Limited (NGX), rising marginally by 15.60 per cent to N260.56 billion at the end of September 2023 from N225.40 billion recorded in the previous month.
According to the Domestic and Foreign Portfolio Investment (FPI) report for the period under review, polled by market operators on a monthly basis, the total transactions at the local bourse resumed its uptrend, rising by 12.66 per cent month-on-month (m/m) to N295.79 billion in September as against N262.56 billion recorded in August.
The performance of the current month when compared to the performance in September 2022 (N81.90 billion) revealed that total transactions increased by 261.17 per cent. The report analysed by Daily Sun revealed that the total value of transactions executed by domestic investors outperformed transactions executed by foreign investors by 76 per cent.
The report also revealed that at the close of the trading month under review, domestic inflows and outflows stood at N134.47 billion and N126.08 billion respectively.
However, total foreign transactions decreased by 5.17 per cent from N37.16 billion (about $47.94 million) to N35.24 billion (about $45.37million) between August 2023 and September 2023.
Furthermore, foreign inflows and outflows for the month continued its descent, standing at N13.67 billion and N21.57 billion. This development is attributed to the current scarcity of dollars in the FX market which is still a challenge facing manufacturers, businesses and even the Federal Government.
Owing to strings of policy somersaults, domestic transactions decreased by 45.30 per cent from N3.556 trillion in 2007 to N1.945 trillion in 2022 whilst foreign transactions also decreased by 38.47 per cent from N616 billion to N379 billion over the same period.
The total domestic transactions accounted for about 84 per cent of the total transactions carried out in 2022, whilst foreign transactions accounted for about 16 per cent of the total transactions in the same period. Further analysis of the FPI report revealed that the transaction data for 2023 shows that total domestic transactions so far in 9 months stood at N2.454 trillion, whilst total foreign transactions done in the same period stood at N258.02 billion.
Reacting to the report, analysts at Cordros Research, whilst stating that domestic investors primarily drove the increase in activities at the NGX, expressed concerns that foreign transactions declined for the third consecutive month, attributing it to the government’s reform-induced momentum which has slowed down and as a result, dampened foreign sentiments.
Daily Sun also observed that although the Naira hit a record low of N1,300/$1 last week Thursday, it however appreciated by N166 to settle at N1,111/$1 at the parallel market and 2.3 per cent to close at N789.94/$1 at the Nigerian Autonomous Foreign Exchange Market (NAFEM).
Feelers across markets suggest the gains may be due to lack of buyers as very few people are inclined to pay around N1300/$ sensing a potential strengthening of the local currency.
However, with the Finance Minister, Wale Edun stating that illiquidity is the reason Nigeria’s foreign exchange market isn’t operating efficiently, shareholders of Nigerian companies with foreign loans are concerned about the impact of the elevated exchange rate on their expected dividends.
Speaking to Daily Sun via a telephone chat, the National Coordinator, Progressive Shareholders Association of Nigeria (PSAN), Boniface Okezie, raised concerns about the challenges faced by Nigerian companies, particularly those in the manufacturing sector, due to the rising exchange rate.
According to Okezie, the fluctuating exchange rates have made it difficult for these companies to repay their foreign loans, even though they were initially obtained at lower interest rates. He maintained that the scarcity of foreign currency has led to a situation where companies, such as GSK are exiting the Nigerian market, and others are hesitant to invest in the country.
He said, “This not only affects the businesses but also impacts shareholders negatively. Many companies are operating at a loss, putting them at risk of shutting down production. In such a scenario, shareholders stand to lose both their dividend income and their investment in these companies”.
