Foreign buyers withdrew N455.62bn from the Nigerian inventory market in 2024, considerably outpacing whole inflows and reinforcing considerations about investor confidence regardless of the Central Bank of Nigeria’s efforts to stabilise the naira.
Industry specialists attributed this to the volatility of the naira, stressing that it created uncertainties and that inflation additionally triggered a blurry future for overseas buyers.
Data from the Nigerian Exchange Limited’s Domestic and Foreign Portfolio Investment Report confirmed that whereas overseas transactions for the yr amounted to N852.03bn, outflows accounted for 53.47 per cent, as inflows stood at N396.41bn, additional highlighting the exit of overseas buyers from the Nigerian capital market.
The report revealed that overseas participation within the Nigerian inventory market remained comparatively low, accounting for 15.25 per cent of whole transactions, whereas home buyers dominated with N4.73tn, representing 84.75 per cent.
The imbalance in participation between home and overseas buyers displays a broader development noticed lately, with overseas gamers lowering their publicity to Nigerian equities amid financial uncertainties and capital management considerations.
Foreign outflows diversified considerably all through 2024, reflecting shifts in investor sentiment. In January, overseas buyers withdrew N37.33bn, whereas inflows stood at N15.78bn, resulting in a web outflow of N21.55bn.
The development continued in February, with outflows rising to N40.88bn, and inflows rising to N24.93bn, narrowing the web outflow to N15.95bn. In March, inflows surged to N52.66bn, outpacing outflows of N41.60bn, making it the primary month in 2024 the place overseas funding within the inventory market exceeded exits.
By April, overseas buyers accelerated their withdrawals, with outflows leaping to N78.25bn, whereas inflows stood at N42.58bn, resulting in a web outflow of N35.67bn, the most important recorded in 2024.
In May, the outflows remained excessive at N69.41bn, whereas inflows elevated to N54.87bn, leading to a web outflow of N14.54bn.
In June, outflows declined to N43.94bn, whereas inflows fell to N38.25bn, leaving a web outflow of N5.69bn.
The second half of the yr noticed decrease outflows in some months however didn’t end in sustained overseas confidence available in the market. In July, overseas outflows dropped to N19.95bn, the bottom recorded within the yr, whereas inflows additionally declined to N37.57bn, resulting in a web influx of N17.62bn.
In August, outflows elevated barely to N24.38bn, whereas inflows dropped to N33.09bn, leading to one other web influx of N8.71bn. However, the development reversed in September as outflows climbed again to N30.15bn, whereas inflows sharply declined to N11.26bn, resulting in a web outflow of N18.89bn.
Foreign exits slowed in October, with outflows declining to N14.15bn, whereas inflows stood at N33.31bn, making a web influx of N19.16bn. The development of web inflows continued in November, with overseas withdrawals rising barely to N15.09bn, whereas inflows dropped to N25.85bn, leading to a web influx of N10.76bn.
However, December noticed a return to excessive outflows, as overseas buyers pulled out N40.49bn, whereas inflows have been N26.26bn, resulting in a web outflow of N14.23bn. Overall, whole overseas outflows for 2024 reached N455.62bn, exceeding inflows of N396.41bn by N59.21bn.
Foreign withdrawals surpassed inflows in seven out of 12 months, reflecting unstable confidence amongst overseas buyers. Despite the upper outflows, overseas participation available in the market improved in comparison with 2023, when whole overseas transactions stood at N410.62bn.
The 107.54 per cent improve in overseas exercise means that whereas buyers have been engaged available in the market, they primarily used alternatives to exit relatively than reinvest in Nigerian equities.
The dominance of home buyers continued in 2024, accounting for 84.75 per cent of whole market transactions.
Domestic transactions reached N4.735tn, greater than 5 occasions the overall overseas transaction worth. A breakdown of home participation confirmed that retail buyers accounted for N2.306tn, representing 48.72 per cent of whole home trades, whereas institutional buyers led with N2.429tn, or 51.28 per cent.
Institutional buyers performed a vital position in market stability, with their participation rising by 18.63 per cent year-on-year, whereas retail investor exercise grew by 11.57 per cent.
The knowledge additionally confirmed important shifts in institutional involvement, significantly in December, when home institutional transactions surged by 97.09 per cent, from N206.02bn in November to N406.04bn in December, reflecting renewed confidence amongst giant buyers.
Retail transactions, in distinction, noticed solely a 2.81 per cent improve over the identical interval. The Nigerian inventory market recorded whole transactions of N5.587tn for 2024, representing a 56.2 per cent improve from N3.578tn in 2023.
This development was largely pushed by elevated home exercise, significantly from institutional buyers. A month-on-month evaluation confirmed that whole transactions in December 2024 rose by 52.29 per cent, from N442.34bn in November to N673.66bn, as a consequence of a 51.20 per cent improve in home transactions from N401.40bn to N606.91bn and a 63.04 per cent improve in overseas transactions from N40.94bn to N66.75bn.
Compared to December 2023, transactions in December 2024 have been up by 95.88 per cent, indicating a pointy rise in market exercise.
The report learn partially, “An additional evaluation of the overall transactions executed between the present and prior month (November 2024) revealed that whole home transactions elevated by 51.20 per cent from N401.40bn in November 2024 to N606.91bn in December 2024.
“Similarly, total foreign transactions increased by 63.04 per cent from N40.94bn (about $24.61m) to N66.75bn (about $43.47m) between November 2024 and December 2024.”
Despite persistent overseas outflows, the change price confirmed relative stability, attributed to the CBN’s financial insurance policies. The naira strengthened from N1,663.39/$ in November 2024 to N1,535.81/$ in December 2024, marking a 7.67 per cent appreciation.
However, the improved change price didn’t instantly translate into increased overseas funding, as buyers remained cautious as a consequence of considerations over inflation, financial coverage changes, and capital repatriation.
The PUNCH earlier reported that overseas buyers withdrew N45.85bn from the Nigerian inventory market in January 2025, an outflow that considerably overshadowed the N25.66bn recorded as overseas inflows throughout the identical interval.
The newest Nigerian Exchange Domestic and Foreign Portfolio Investment Report revealed that overseas outflows accounted for 64.12 per cent of whole overseas transactions on the change, reinforcing considerations over declining overseas participation available in the market regardless of the relative stability of the naira.
It confirmed that whole overseas transactions elevated by 7.13 per cent, rising from N66.75bn in December 2024 to N71.51bn in January 2025. However, this improve was largely pushed by buyers liquidating their holdings, as evidenced by the a lot bigger outflow in comparison with inflows.
This development signifies that whereas some overseas buyers should still have interaction with the Nigerian market, a larger proportion choose to exit, contributing to capital flight.
The withdrawal of overseas funds from the market got here amid a 9.89 per cent decline in whole fairness transactions on the NGX, which fell from N673.66bn in December 2024 to N607.05bn in January 2025.
On a year-on-year foundation, whole transactions dropped by 6.83 per cent from N651.52bn recorded in January 2024. This means that investor sentiment remained subdued as each overseas and home gamers exercised warning in response to prevailing financial situations.
Experts have beforehand famous that sustained coverage consistency, improved capital market regulation, and clear FX repatriation frameworks can be important in attracting overseas buyers again to Nigerian equities.
Experts react
When contacted, the Chief Executive Officer of Cowry Treasurers Limited, Charles Sanni, defined that overseas buyers usually herald funds of their currencies and that the naira’s volatility had created uncertainties.
“Inflation created a blurry future for them. The expectation was that Nigeria would make money, but because of the volatility of the naira, it wasn’t stable, so they had to decide whether to continue investing. The NGX performance was fine, but it was eroded by foreign losses,” Sanni famous.
He expressed optimism about potential enhancements within the coming months. However, he highlighted considerations over excessive home rates of interest and their influence on company margins.
“If domestic interest rates remain high, the cost of funds for companies will rise, and their margins will thin out over time. Our credit system is not robust enough, and interest rates are already too high,” he acknowledged.
Sanni warned that the state of affairs displays a insecurity within the financial system, which might finally result in investor fatigue. “The government needs to manage inflation, stabilize the naira at around N1,200 per dollar, and ensure no crisis in Rivers State. There should also be more transparency in financial reporting,” he suggested.
Also commenting on the problem, the Managing Director of Highcap Securities, David Adonri, acknowledged that Foreign buyers within the Nigerian capital market stay cautious as a consequence of considerations over sovereign danger, profitability, and liquidity,
Adonri famous that whereas buyers might not be utterly exiting the market, some are repatriating earnings or lowering their publicity to the debt market as a consequence of declining rates of interest.
“Perhaps they are not satisfied with the country’s sovereign risk. However, they are not leaving but may just be adjusting their positions. There may also be the perception that equities are at their peak and due for harvesting,” he acknowledged.
Despite these considerations, Adonri expressed optimism about improved overseas investor confidence, significantly following the Central Bank of Nigeria’s settlement of most trapped funds. He additionally highlighted key reforms that would entice extra overseas participation.
“The Nigerian capital market is inundated with hedging futures to manage currency risks. There is no more capital control, so foreign investors can now enjoy free entry and free exit of capital. These are measures capable of boosting foreign investor confidence,” he added.
An economist and funding specialist, Vincent Nwani instructed The PUNCH that Foreign participation within the Nigerian inventory market remained weak within the full yr to December 2024, standing at 16 per cent an enchancment from 10 per cent in 2023, but nonetheless considerably low.
Nwani attributed the development to a persistent lack of investor confidence and overseas change challenges. “When the multinationals left the country, it might have been one of the reasons why they left. Foreign investors cannot bring in their money that must have informed this decision,” he stated.
While some could argue that Nigerian buyers are filling the hole left by overseas buyers, Nwani cautioned in opposition to viewing the state of affairs solely from an emotional perspective.
“In the London Stock Exchange, domestic investors don’t even control up to 59 per cent. The stock market is international, and on the flip side, it shouldn’t be like this. The focus should be on ensuring a stable foreign exchange rate,” he added.
