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•Institutional inflows rise by N73bn
By Chinwendu Obienyi
Retail participation in Nigeria’s equities market is slowly disappearing, a development experts said could hamper the growth of Africa’s biggest economy. Recent statistics revealed that its participation in the market fell by 10 per cent at the end of April 2024.
According to the Domestic and Foreign Portfolio Investment Report of the Nigerian Exchange Limited (NGX) for the month under review, the participation of retail investors in the market stood at 45 per cent while institutional investors’ participation stood at 55 per cent.
Specifically, a comparison of domestic transactions in the current and prior month (March 2024) revealed that retail transactions decreased by 54.89 per cent from N223.37 billion in March to N100.77 billion in April 2024.
Although, the institutional composition of the domestic market decreased by 43.58 per cent from N220.91 billion in March 2024 to N124.63billion in April 2024, inflows of institutional investments stood at N73.40 billion compared to N57.14 billion recorded by retail investors.
The report further revealed that while retail outflows stood at N43.63 billion in the month under review, institutional outflows stood at N51.24 billion.
For context, retail participation in the market has been on a downward trend, which has been a source of concern to capital market stakeholders.
For example, institutional investors had outperformed retail investors by 4 per cent in terms of participation earlier in January. However, the trend reversed as retail investors outperformed institutional investors participation by 10 per cent. The trend continued as the month of March saw a marginal increase of 0.56 per cent. However, institutional investors made a comeback, outperforming retail counterparts by 10 per cent.
In the last two years, approximately 30 million new retail investors have opened up brokerage accounts in the U.S market and as at last year, retail investors across platforms set a new all-time high for weekly inflows with about $1.5 billion pouring into the market in a single week. According to a 2020 survey, about 33 per cent are retail investors in the U.K market and with Nigeria accounting for about 4-5 per cent of retail investors, financial experts and operators are of the opinion that this could pose serious risk to the growth of the capital market.
Whilst explaining that the NGX is embarking on strategies to woo investors back to the market, the Group Chief Executive Officer, NGX Group, Temi Popoola, said one of such many strategies was through technology.
He said that financial literacy and inclusion remain at the front burner for stakeholders in the capital market, noting that the exchange had made it a priority to contribute its quota toward the achievement of key targets of Nigeria’s National Financial Inclusion Strategy through initiatives that encourage the wider investing public to develop investment habits.
“Yes it is true that several investors lost their investments during the crash which happened in 2008. However, to drive listings, we are taking a closer look at our rules to see areas of amendments to ensure companies raise capital more efficiently whilst protecting the investing public. NGX is also working with several stakeholders to ensure that the time to market and the costs for listing are optimized,” he said.
For his part, the Group Managing Director of Afrinvest, Ike Chioke, explained that retail investors are faced with inflationary pressure caused by domestic factors and the exchange rate effect coming from the macro issues facing the Nigerian economy.
Chioke said, “This is what is declining their appetite. It gets even more difficult to pick the right stock and do well. Even in this kind of difficult environment, there are still some good stocks that have returned more than 80 per cent this year. With inflation and naira devaluation, you are much better off avoiding them. In combination with Airtel, Fidelity Bank, and even MTN, you know some have done well.”
