Nigeria Experiences Surge In Stock Market Foreign Investment

Foreign portfolio investment (FPI) into the stock market of Nigeria witnessed a significant surge of 167.8% Year-on-Year (YoY) in February 2024, reaching N118.92 billion compared to N44.52 billion in the same period in 2023. This remarkable increase can be attributed to improved liquidity in the foreign exchange (FX) market, following reforms initiated by the Central Bank of Nigeria (CBN).

The Nigerian Exchange Limited (NGX) revealed these figures in its Domestic and Foreign Portfolio Investment report for February 2024. The report highlighted a 0.3 percentage point rise, taking the share of FPI in the total equities transaction to 11.78% of N1.009 trillion during the period.

Furthermore, foreign investors’ stake increased Month-on-Month (MoM) by 23.9% to N65.81 billion from N53.11 billion recorded in January 2024. The contribution of foreign portfolio investors to the total equities transaction also surged to 18.39% in February from 8.15% in January 2024.

Year-to-Date (YtD) data indicates FPI inflows at N40.71 billion, constituting 37.9% of the total foreign investors’ commitment, while outflows stood at N78.21 billion, representing 62.1% of the foreign portfolio investment.

Investment analysts have highlighted that stability in the foreign exchange market is pivotal for attracting improved FPI inflows. David Adonri, Vice Chairman of Highcap Securities, emphasised the importance of resolving trapped funds and restoring foreign investors’ confidence. He stated, “Foreign investors will invest where they can move their capital freely. If profitability, liquidity, and investment safety in Nigeria are assured with negligible country risk, FPI will flow in.”

Similarly, Oluwaseun Dosumu, Head of Research at Parthian Securities, commented on the potential for a resurgence of foreign investors based on the policies and dynamics of the foreign exchange market in 2024. He pointed out the weakened state of exchange rate fundamentals in 2023 but expressed optimism for an upturn in foreign portfolio investment with anticipated enhancements in supply this year.

The positive trend in FPI inflows underscores the importance of maintaining a stable and attractive investment environment, which is crucial for sustained economic growth and development in Nigeria.