BUSINESS DAY
Foreign investment in Nigerian stocks fell last month to its lowest level since President Bola Tinubu’s reforms that sparked a massive rally in the equities market, new data from the nation’s bourse show.
The total amount of stocks bought by foreign investors plunged to N9.45 billion from N22.72 billion in June, according to data from the Nigerian Exchange Limited (NGX).
Stocks worth N31.09 billion were offloaded by foreigners in July, compared to an outflow of N23.02 billion in the previous month.
Foreign inflow into Nigerian stocks had jumped more than seven-fold in May to N27.51 billion, its highest level since December 2021, as the market soared on the last two trading days of that month following the announcement of petrol subsidy removal by Tinubu on May 29. That month, the market posted its first net inflow this year as the outflow stood at N9.65 billion, up from N4.80 billion in the previous month.
The subsidy removal was followed by a foreign exchange reform that led to a large devaluation of the naira in mid-June.
“The uncertainty in the FX market may have led to the exit observed in the month of July,” Ayodeji Ebo, managing director/chief business officer of Optimus by Afrinvest, told BusinessDay. “In addition, profit-taking may also be a major factor for the pull-out.”
Foreign participation in the equities market had increased to 11.51 percent in May from 4.43 percent in the previous month. It fell to 11.25 percent in June and 5.77 percent in July, the NGX data show.
The total transactions executed by Foreign investors fell by 11.37 percent in July to N40.54 billion (about $52.58 million) in the previous month, while domestic deals rose 83.50 percent to N662.44 billion.
BusinessDay had reported in February that for the first time in five years, foreign investors bought more Nigerian stocks than they sold in 2022.
The net foreign inflow came as foreign investors were forced to reinvest their dividends and sales proceeds into securities because they could not get dollars to repatriate their funds.
The latest data from the NGX explains foreign portfolio investors’ (FPIs) sentiments about the Nigerian capital market, hence the urgent need to provide confidence by increasing FX earnings in the medium to long term, Ebo said.
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