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By Chinwendu Obienyi
Foreign transactions done on the floor of the Nigerian Exchange Limited (NGX) reached N785.28 billion in the first 11 months of 2024, beating the N411 billion recorded in the corresponding year of 2023.
This signals significant interest from international investors and highlights a rebound in foreign investments, possibly driven by economic reforms, favorable policies by the Central Bank of Nigeria (CBN), or improved market conditions.
According to the Domestic and Foreign Portfolio Investment Report for November 2024, total domestic transactions stood at N4.128 trillion, whilst total foreign transactions stood at N785.28 billion. In the same period of 2023, total domestic transactions stood at N3.167 trillion while total foreign transactions stood at N411 billion.
Over a 17- year period, domestic transactions decreased by 10.94% from N3.556 trillion in 2007 to N3.167 trillion in 2023; whilst foreign transactions also decreased by 33.28% from N616 billion to N411 billion over the same period.
Furthermore, total domestic transactions accounted for about 89% of the total transactions carried out in 2023, whilst foreign transactions accounted for about 11% of the total transactions in the same period.
However, the report revealed that by 30 November 2024, the total value of transactions executed by domestic investors outperformed transactions executed by foreign investors by 82%.
Specifically, domestic inflows (90.7% of gross transactions) dipped by 11.8% m/m to N401.40 billion (October, N455.27 billion) due to a decline in collections from institutional investors (-27.8% m/m) amid increases from retail investors (+14.9% m/m).
On the other hand, foreign inflows (9.3% of gross transactions) dropped after a month of expansion, declining by 13.74% m/m to N40.94 billion (about $24.61 million) in November (October, N47.46 billion- about $28.33 million).
Also, foreign outflows for the month stood at N15.09 billion while domestic outflows stood at N206.11 billion.
Reacting to the development, economic analysts highlighted that changes in interest rates or exchange rate stability could make Nigeria a more attractive destination for foreign capital.
According to them, better corporate earnings, increased market liquidity, or strong performance in specific sectors might have attracted more foreign investments in the reported months.
Cordros Research, in its weekly report, said that the lower participation in the local bourse may be primarily attributed to investors’ preference for debt securities due to attractive yields in the fixed-income market.
The report said, “While we expect domestic investors to continue to contribute the most to total transaction value, we think buying activities, generally, will be constrained by elevated yields in the fixed income market. Additionally, we think the ongoing geopolitical tensions are likely to constrain FPI participation in the Nigerian stock exchange market”.
Meanwhile, the naira closed flat this week at N1,534.05/$1 at the Nigerian Foreign Exchange Market (NFEM) despite the CBN intervention at the official window, as the apex bank sold $37.10 million to authorized dealers.
Notably, the country’s FX reserves grew by $9.60 million week-on-week (w/w) to $40.88 billion (30 December). In the forwards market, the naira rates increased across the 1-month (+0.3% to N1,573.93/$1), 3-month (+0.5% to N1,631.60/$1), 6-month (+0.9% to N1,711.77/$1) and 1-year (+1.9% to N1,880.59/$1) contracts.
“We highlight that the CBN has been primarily supporting FX liquidity, as FPI inflows have remained tepid partly due to existing geopolitical risks including the Middle East regional conflicts, Russia-Ukraine war and the expectation of rising global trade protectionism. Going ahead, we believe FX liquidity will be suboptimal to keep the naira stable in the near term, just as FX demand increases”, Cordros Research said.
