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By Chinwendu Obienyi
Total foreign transactions on the Nigerian Exchange Limited (NGX) dropped 27.59 per cent from N28.02 billion (about $68.31 million) to N20.29 billion (about $49.33 million) between April 2021 and May 2021.
This was even as the value of purchase transactions (FPI inflow) on equities fell by 53.28 per cent in the month under review.
Data obtained from the NGX Domestic and Foreign Portfolio Investment (FPI) flows report for May 2021 revealed that FPI inflows dropped further to N13.01 billion from N18.02 billion recorded in April 2021, resulting in a 53.28 per cent decrease, while outflows fell to N7.28 billion from N9.82 billion recorded in the previous month.
Analysis of the report revealed that the total transactions at the nation’s bourse fell 39.23 per cent from N159.93 billion in April 2021 to N97.19 billion in the month under review -the lowest since August 2020 (N94.45 billion).
The performance of the current month when compared to the performance in May 2020 (N119.15 billion) revealed that total transactions dropped 18.43 per cent. In May 2021, the total value of transactions executed by domestic investors outperformed transactions executed by foreign investors by 58 per cent.
Further analysis of the report revealed that domestic participation stood at 79 per cent, while foreign participation stood at 21 per cent.
Similarly, total transactions executed between May and April 2021, revealed that total domestic transactions declined 41.70 per cent from N131.91 billion in April to N76.90 billion in May 2021.
Commenting on the development, some market analysts told Daily Sun that the sustained decline in the value of transactions executed at the NGX reflects the spill-over effects of the uptick of yields in the fixed income space and persistent liquidity challenges in the FX market.
“Despite the attractiveness of Nigerian stocks compared to peers (PE ratio: 12.86 vs EM average: 22.90), we highlight that the FPI participation is now the lowest since the NGX started keeping records in 2013.
We maintain our expectation of weak domestic and foreign investors’ participation on the local bourse in the near term due to elevated yields in the fixed income space and lingering liquidity constraints in the FX market”, Cordos Capital said in an emailed research note.
The NGX report further revealed that institutional investors outperformed retail investors by 14 per cent while a comparison of domestic transactions in the current and prior month (April 2021) revealed that retail transactions fell by 9.75 per cent from N36.50 billion in April 2021 to N32.94 billion in May 2021.
Similarly, the institutional composition of the domestic market declined 53.93 per cent from N95.41billion in April 2021 to N43.96 billion in May 2021.
