Foreign investment in stock market rises 168% to N118.92bn

Foreign portfolio investment, FPI, into the stock market rose by 167.8 percent, Year-on-Year (YoY), to N118.92 billion in February 2024 from N44.52 billion in the corresponding period in 2023 buoyed by improved liquidity in the foreign exchange (FX) market following reforms by the Central Bank of Nigeria, CBN.

The Nigerian Exchange Limited (NGX) disclosed this in its Domestic and Foreign Portfolio Investment report for February 2024, which showed a 0.3 percentage point increase to 11.78 per cent in share of FPI in the total equities transaction of N1.009 trillion during the period.

Similarly, the foreign investors’ stake rose Month-on-Month (MoM) by 23.9 percent to N65.81 billion from N53.11 billion in January 2024.

Also the foreign portfolio investors’ contribution to the total equities transaction rose to 18.39 percent from 8.15 percent between January and February 2024.

Further analysis shows that Year-to-Date, YtD, FPI inflw at N40.71 billion, represents 37.9 percent of the total foreign investors’ commitment, while outflow at N78.21 billion, represents 62.1 percent of the foreign portfolio investment.

Investment analysts had indicated that stability in the foreign exchange market would result in improved FPI inflow.

David Adonri, Vice Chairman, Highcap Securities, had projected that resurgence of foreign investment inflow into the stock market if the Central Bank of Nigeria (CBN) sustain remittance of trapped funds to foreign investors.

He said: “Foreign investors’ confidence was seriously eroded by their trapped funds in Nigeria. Many of them have consequently been inactive for the past few years.

“Since this administration has made it a cardinal objective to clear the outstanding remittances, there is a silver lining for FPIs that can encourage their return. If CBN sustains the remittance of trapped funds to foreign investors, more FPI may start flowing in this year and henceforth.

“Foreign investors will invest where they can move their capital in and out without hindrance. If the profitability, liquidity and safety of investment in Nigeria are assured and country risk is negligible, FPI will flow in.

Simiarly, Oluwaseun Dosumu, Head of Research, Parthian Securities, said: “The resurgence of foreign investors in the Nigerian market is contingent upon the policies and dynamics of the foreign exchange market in 2024. The preceding year, 2023, witnessed a weakened state of exchange rate fundamentals within the Nigerian forex market, primarily attributed to a decline in foreign exchange supply.

“With the anticipation of an enhancement in supply during the year, there is a potential for a modest upturn in foreign portfolio investment in the Nigerian Exchange.”