Total transactions by domestic portfolio investors in the stock market rose by 86.23 per cent as they invested a total value of N1.335 trillion in the first quarter (Q1) of 2024.
The domestic investors have continued to hold ground on the floor of the Nigerian Exchange (NGX) Limited despite rising inflation and currency volatility in the foreign exchange market as they were major drivers of the Domestic & Foreign Portfolio Investment.
This was contained in the Domestic and Foreign Portfolio Investment (FPI) March 2024 report. The Domestic and Foreign Portfolio Investment Report is prepared on a monthly basis by NGX Regulation Limited, with trading figures from market operators on their Domestic and Foreign Portfolio Investment (FPI) flows. These transactions are carried out by Domestic and Foreign investors.
Total transactions at the nation’s bourse from January to March 2024 stood at N1.548 trillion as against N530.23 billion in the corresponding period of 2023. Foreign transactions stood at N213.18 billion, accounting for about 13.77 per cent of the total transactions carried out, while domestic transactions constituted N1.335 trillion, outperforming the foreign investment during the same period.
Analysis of domestic transactions showed that domestic retail transactions pulled N670.89 billion investment, while institutional investors’ investment amounted to N663.87 billion in Q1, 2024.
Analysts have noted the foreign exchange backlog, among other factors responsible for foreign investors staying clear from the Nigerian stock market.
They observed that the high local investors participation in the market is good for the local bourse, saying that this has restored credibility and stability to the market, which was hitherto marred by volatility occasioned by the activities of foreign investors.
Meanwhile, the CBN in March 2024 announced that it has successfully cleared all valid foreign exchange backlogs, effectively eliminating a legacy burden.
This accomplishment fulfils a commitment made by CBN Governor, Mr. Olayemi Cardoso, who vowed to address an inherited backlog of $7 billion in claims.
Analysts at Cordros Securities Limited said, “we believe the prospect of FPIs returning to the market is a key factor to monitor in 2024. Foreign investors’ interest in the Nigerian equities market has remained weak due to difficulty in accessing and repatriating funds.
They said, “we expect domestic investors to continue to dominate the domestic equities market over the short-to-medium term, even as higher fixed income (FI) yields may constrain buying activities.
“At the same time, we expect to see improvement in foreign participation over the medium term, even as foreign investors are likely to adopt a wait-and-see approach in the near term. Our expectation is hinged on the policy pronouncements and reforms by the current administration, undoing the policy mistakes of the past eight years.”
The chief operating officer of InvestData Consulting Limited, Mr Ambrose Omordion added that “It is a good thing that domestic interest is building in the market; it is really positive. This is what we have been clamouring for, where the local investors will be the drivers of the market. What we, typically, see is that domestic investors follow the investment pattern of the foreign investors whereby if we see that they are buying, we will buy and if we find out they are selling, we will sell.”
Cowry Asset Management Limited noted that, “the appetite of foreign portfolio investors (FPIs) continues to decline amid sustained fear of foreign exchange volatility eroding their returns on investment and insecurity currently being encountered in the country.”