By Chinwendu Obienyi
Amid activities fueled by institutional investors on the floor of the Nigerian Exchange Limited (NGX), total transactions done on the nation’s bourse rose to N3.56 trillion for the 12 months of 2023, signaling a 53.9 per cent year-on-year (y/y) increase from N2.32 trillion recorded in the corresponding period of 2022.
This is according to the NGX Domestic and Foreign Portfolio Report for December 2023. The report is prepared monthly by NGX Regulation Limited, with trading figures from market operators on their domestic and foreign portfolio investment (FPI) flows.
Analyzing the report on a month-on-month (m/m) basis, total transactions rose to a six-month high, expanding by 14.38 per cent to N343.90 billion in December compared to N300.67 billion recorded in November 2023.
The performance of the month when compared to the performance in December 2022 (N140.70 billion) revealed that total transactions increased by 144.42 per cent. Similarly, the total value of transactions executed by domestic investors outperformed transactions executed by Foreign Investors by 72 per cent in December 2023.
Further analysis of the total transactions executed between the current and prior month (November 2023) revealed that total domestic transactions increased by 29.10 per cent from N229.30 billion in November to N296.03 billion in December 2023.
Analysts while reacting to the performance, highlighted that the improvement was mainly due to a 29.1 per cent m/m increase in domestic transactions to N296.03 billion (86.1 per cent of total transaction value). According to them, the increase in domestic transactions was primarily driven by institutional investors (+49.7 per cent m/m) amid a marginal contraction from retail investors (-1.2 per cent m/m).
Meanwhile, foreign inflows remained weak, as foreign transactions declined by 32.9 per cent m/m to N47.9 billion compared to N71.40 billion recorded in the previous month due to the effect of the lingering FX liquidity constraints.
The report also revealed that institutional Investors outperformed retail investors by 38 per cent. A comparison of domestic transactions in the current and prior month (November 2023) revealed that retail transactions decreased by 1.21 per cent from N92.78 billion in November to N91.61 billion in December 2023.
However, the institutional composition of the domestic market increased by 49.74 per cent from N136.52 billion in November 2023 to N204.42 billion in December 2023.
Highlights of the performance of the market over the last decade showed that over a sixteen (16) year period, domestic transactions decreased by 10.94 per cent from N3.556 trillion in 2007 to N3.167 trillion in 2023 whilst foreign transactions also decreased by 33.28 per cent from N616 billion to N411 billion over the same period.
Total domestic transactions accounted for about 89 per cent of the total transactions carried out in 2023, whilst foreign transactions accounted for about 11 per cent of the total transactions in the same period.
Reacting, market analysts stated that they expect domestic investors to continue to dominate the domestic equities market over the short-to-medium term, even as higher fixed-income yields may constrain buying activities.
“Elsewhere, while we believe foreign investors will continue to adopt a wait-and-see approach in the near term, we envisage improved foreign participation over the medium term driven by expected FX inflows as guided by the authorities, CBN’s recent actions in clearing its FX backlogs, and firm direction of interest rates”, they said.