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Foreign investor participation in Nigerian stock market falls to 14.6%

The total value of domestic transactions executed by domestic Investors in the half year 2022 was N1.419 trillion against N243 billion which was the total transactions carried out by foreign investors during the period under review.

Foreign investment-related transactions on the exchange fell to 14.6% of the total N1.66 trillion recorded in the first half of the year.

When annualized it represents the lowest foreign investor participation on the exchange in the last 15 years.

A cursory review of the NGX report of transactions on the Nigerian Stock Exchange reveals the total value of domestic transactions outperformed transactions executed by foreign investors by N1.176 trillion or 483.9%.

As at 30th of June 2022, total transactions at the nation’s bourse decreased by 74.23% from N607.45 billion (about $1.45 billion) in May 2022 to N156.52billion (about $371.53 million) in June 2022.

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The performance of the current month when compared to the performance in June 2021 (N100.77billion) revealed that total transactions increased by 55.32%. In June 2022, the total value of transactions executed by Domestic Investors outperformed transactions executed by Foreign Investors by 46%

Further analysis

  • Further analysis of the total transactions executed between the current and prior month (May 2022) revealed that total domestic transactions decreased significantly by 72.16% from N562.15billion in May to N114.33billion in June 2022.
  • Similarly, total foreign transactions decreased by 6.87% from N45.30billion (about $108.02million) to N42.19billion (about $100.15million) between May 2022 and June 2022.
  • Institutional Investors outperformed Retail Investors by 22%. A comparison of domestic transactions in the current and prior month (May 2022) revealed that retail transactions decreased by 40.54% from N74.19billion in May 2022 to N44.11billion in June 2022. Similarly, the institutional composition of the domestic market decreased by 85.61% from N487.96billion in May 2022 to N70.22billion in June 2022.

FDT

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Key highlights of a decade’s performance

  • Highlights of the performance of the market over the last decade revealed that over a fifteen (15) year period, domestic transactions decreased by 58.80% from N3.556trillion in 2007 to N1.465 trillion in 2021 whilst foreign transactions also decreased by 29.38% from N616billion to N435 billion over the same period.
  • Total domestic transactions accounted for about 77% of the total transactions carried out in 2021, whilst foreign transactions accounted for about 23% of the total transactions in the same period.

What you should know

  • The stock market regained more confidence at the start of the year, with key drivers like BUA Foods, listing on NGX; investors’ reaction to companies’ full-year earnings and dividend declarations; predominance of domestic players over foreign players in the market, and low yields in the fixed income market which forced investors to consider more profitable securities in the equity market.
  • Capital market analysts stated that local investors are taking advantage of the incredibly low prices of stocks in NGX to increase their investments. They explained that local investors are increasing their stake in the equities market due to the attractive dividend yield in the market and because of the low yield environment in the fixed income market.
  • They observed that the development is good for the local bourse, saying that it would restore credibility and stability to the market, which was hitherto marred by volatility occasioned by the activities of foreign investors.
  • On a monthly basis, Nigerian Exchange Limited (NGX) polls trading figures from market operators on their Domestic and Foreign Portfolio Investment (FPI)4 flows.
  • 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.
  • These transactions are carried out by Domestic and Foreign investors. The Domestic investors are further categorized into Retail and Institutional investors.

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