By Chinwendu Obienyi
Nigeria’s total foreign portfolio inflows in equities reached N245.11 billion in two months (April and May) of 2024, data from the Domestic and Foreign Portfolio Report of the Nigerian Exchange (NGX) revealed.
The Domestic and Foreign Portfolio Investment Report is prepared on a monthly basis by NGX Regulation Limited, with trading figures from market operators on their Domestic and Foreign Portfolio Investment (FPI) flows.
Analysing the report for the month of May, total foreign transactions increased by 2.86 per cent from N120.83 billion (about $90.83 million) to N124.28 billion (about $83.78 million) between April 2024 and May 2024. This meant that inflows had increased by N245.11 billion in two months, signifying renewed investor confidence in the Nigerian market, driven by various economic reforms and market-friendly policies introduced by the current administration.
The report revealed that total transactions at the nation’s bourse increased by 2.64 per cent from N346.23 billion (about $260.28 million) in April 2024 to N355.38 billion (about $239.56 million) in May 2024.
The performance of the current month when compared to the performance in May 2023 (N322.92 billion) revealed that total transactions increased by 10.05 per cent in the same period whilst the total value of transactions executed by domestic investors outperformed transactions executed by foreign investors by 30 per cent.
Further analysis of the total transactions executed between the current and prior month (April 2024) revealed that total domestic transactions increased by 2.53 per cent from N225.40 billion in April 2024 to N231.10billion in May 2024, supported by a 12.7 per cent month-on-month (m/m) surge in inflows from retail investors, amid a 5.7 per cent m/m decline in inflows from institutional investors.
It will be recalled that the Central Bank of Nigeria (CBN) reported that foreign investors purchased over $1 billion in Nigerian assets in February alone, contributing to the total portfolio flows reaching $2.3 billion in early 2024. This influx of investment was expected to provide short-term relief to Nigeria’s declining forex reserves and signal a positive outlook for the country’s economic prospects. However, the increase in foreign portfolio inflows highlights a growing optimism among international investors about Nigeria’s economic reforms and market potential.
Commenting on the development, analysts at Cordros Research, noted that while expect domestic investors to continue to contribute the most to total transaction value, buying activities will be constrained by elevated yields in the fixed income market following the Monetary Policy Committee’s tight monetary policy stance.
“On the other hand, we expect the improved FX market liquidity and reduced naira volatility to support foreign investor participation in the equities market”, they said.