Follow Us on Google
…Want naira strengthened
By Chinwendu Obienyi
Financial experts, on Thursday, lauded the Central Bank of Nigeria (CBN) for its innovative policies, attributing this year’s record surge in foreign transactions on the Nigerian Exchange Limited (NGX) to their strategic impact.
According to them, the reforms have prioritised enhancing market transparency and stabilizing the foreign exchange (FX) market, key measures that have been instrumental in restoring investor confidence and increasing foreign participation in Nigeria’s capital markets.
This comes as the Nigerian Exchange Limited’s Domestic and Foreign Portfolio Investment Report for October 2024 reveals a staggering 156 per cent year-on-year growth in foreign investors’ transactions, which climbed to N744.34 billion from N291.38 billion in 2023.
The performance reflects increased global interest despite challenging economic conditions, the experts noted.
The report also revealed that foreign inflows totaled N344.30 billion, while outflows were higher at N400.04 billion, indicating a net outflow.
However, domestic investors accounted for 83.35 per cent of total transactions, with a total of N3.726 trillion, overshadowing foreign participation.
Furthermore, retail investors contributed N1.910 trillion, more than double their N935.78 billion transactions in 2023 while Institutional investors executed N1.817 trillion, a modest increase from N1.706 trillion in 2023.
Total NGX transactions grew 1.97 per cent month-on-month from N493.01 billion in September 2024 to N502.73 billion in October 2024.
A sharp 127.54 per cent YoY increase was recorded in October 2024 compared to N220.94 billion in October 2023 whilst domestic transactions rose 0.81 per cent month-on-month, while foreign transactions saw a more significant 14.61 per cent month-on-month growth, from N41.41 billion to N47.46 billion.
Reacting to the development, experts who spoke to Daily Sun, noted that recent reforms in the foreign exchange (FX) market by the CBN have enhanced market transparency and stability.
They added that the aggressive hikes in the Monetary Policy Rate (MPR) aimed at curbing inflation and stabilizing the naira, with support from the International Monetary Fund (IMF) likely contributed to increased foreign investor participation.
Vice President, High cap Securities Limited, David Adonri, explained that the dominance of domestic investors underscores growing confidence in the local market.
“Sustained foreign interest, despite net outflows, signals the effectiveness of CBN policies in creating a more favorable investment climate.
The robust performance of both domestic and foreign investors points to a deepening capital market and increased liquidity on the NGX.
These trends highlight the growing vibrancy of Nigeria’s equities market, even as it adapts to evolving macroeconomic policies and global investment sentiments”, Adonri said.
However, he called on the apex bank to checkmate the hiking of interest rates as it could offset gains in the market.
“Yes, the apex bank’s reforms in the FX market and aggressive MPR hikes are showing results in terms of attracting portfolio investments. However, sustained high interest rates may strain borrowing costs for businesses, potentially offsetting gains in other areas”, Adonri stated.
For his part, the Chief Executive Officer, Crane Securities, Mike Eze, the net outflow of foreign funds (inflows of N344.30 billion versus outflows of N400.04 billion) reflects lingering concerns over FX repatriation risks and currency volatility.
“This underscores the need for continued reforms to enhance the competitiveness of the naira and address structural economic issues.
The CBN’s monetary tightening may stabilize inflation in the short term, but the increased domestic transactions and rising market activity could spur demand-side inflation if not carefully managed. But overall, the NGX’s performance is a positive indicator for Nigeria’s economy, which reflects strengthened investor confidence and deepening financial markets”, Eze said.
