Political uncertainties force foreign investors to dump Nigerian equities – For every unit of purchase being made at the Nigerian stock market by foreign investors, they are selling two units as political risks and macroeconomic uncertainties continue to reduce investors’ appetite for Nigerian equities.
Trading data on domestic and foreign portfolio investments (FPI) at the Nigerian Stock Exchange (NSE) showed that foreign investors’ outflows from the equities market increased by 124.7 per cent to about N131 billion in May as against N58.25 billion in April. However, there was a 3.45 per cent decrease in foreign inflows to N62.06 billion in May as against N64.28 billion recorded in April.
The FPI report used two key indicators-inflow and outflow, to gauge foreign investors’ mood and participation in the stock market as a barometer for the economy. Foreign portfolio investment outflow includes sales transactions or liquidation of equity portfolio investments through the stock market while inflow includes purchase transactions on the NSE. The NSE report is generally regarded as a credible gauge of foreign portfolio investments in Nigeria as it coordinates data from nearly all active investment bankers and stockbrokers.
Total transactions at the equities market increased by 49.96 per cent from N212.23 billion recorded in April to N318.27 billion in May.
A five-month report showed that the cumulative transactions from January to May increased by 97.13 per cent to N1.409 trillion in 2018 compared with N714.99 billion recorded in the same period of 2017.
The latest report stated that the institutional composition of the domestic market increased by 97.87 per cent from N46.51 billion in April to N92.03 billion in May. The retail composition declined by 22.92 per cent from N43.19 billion in April to N33.29 billion in May.
In April, there was a positive net foreign inflow of N6.03 billion in April 2018 and N36.91 billion for the four-month period ended April 2018. In the comparable period ended April 2017, Nigerian equities had suffered net FPI deficit of N79.73 billion. Further analysis indicated positive net foreign inflow of N30.88 billion in first quarter 2018 compared with a negative net foreign investment position of N86.36 billion in comparable first quarter 2017.
Month-on-month analysis had shown a positive trend in net foreign investment inflow throughout the first quarter 2018. Foreign inflow totalled N91.75 billion in January 2018 as against outflow of N74.64 billion. Foreign inflow and outflow stood at N44.89 billion and N38.33 billion respectively in February 2018 while foreign inflow and outflow recovered to N69.71 billion and N62.50 billion respectively in March 2018.
Total transactions at the Nigerian equities market in first quarter 2018 had stood at N878.97 billion compared with N454.48 billion recorded in first quarter 2017. Nigerian domestic investors had accounted for N497.15 billion in first quarter 2018 as against N243.42 billion in comparable period of 2017.