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Nigerian Stock Exchange

The Nigerian stock market has lost N94.09 billion to withdrawals made by foreign investors in the months of January and February. This surpassed the total foreign inflow in the country, as uncertainty continues to influence investors’ decisions.

The two months total foreign outflow is estimated at 56.7 percent of total foreign portfolio commitment in the stock market, rising above the foreign portfolio inflow, which stood at N71.74 billion.

Note the total stake of foreign investors in the market stood at N165.8 billion within the period.

This is the breakdown of monthly foreign inflows

According to available data on Foreign & Domestic Portfolio Participation on the Nigerian Stock Exchange, (NSE), the foreign outflows increased by 5.20 percent month-on-month (MoM) from N37.11 billion in December 2018 to N39.04 billion in January. In also rose by 41 percent month on month in February to N55.02 billion.

Why Foreign Investors are jittery: Analysts at United Capital Plc believe that the uncertainty among investors could be due to the effect of President Muhammadu Buhari’s re-election on policies. In a report by the company, themed, “FPIs are selling Stocks but buying T-Bills & Bonds, Why?”, it was stated that foreign investors want bold policies that assure sustainable long-term growth.

Also, the analysts added that a surge in US bond yields lured investors to buy more assets in U.S. while withdrawing from Nigeria and other emerging and frontier markets. Note that the uncertainty surrounding election outcome could as well also influence foreign investors.

“Over 2018, many investors withdrew from emerging and frontier markets (Nigeria inclusive) and bought more assets in the US due to the spike in US bond yields, as well as the appreciating dollar.

“Worsened by election uncertainty, the Nigerian equity market saw a net foreign outflow to the tune of N66.2 billion over 2018, compared to net foreign inflows of N336.9 billion in 2017.’’

2019 still looks good for more inflows

According to analysts, this year will still record more funds flowing back to Nigeria as elections have been concluded. But the growth of the inflow will be to an extent due to lack of structural reform.

“Against the backdrop of a better balance of risk this year and considering the extreme valuation differences between Nigeria (9.2x) and the rest of the world (FM: 11.5x, EM: 12.4x and the world: 16.9x), 2019 should see more funds flow back to Nigeria – especially after elections.

“Nevertheless, we expect any potential upside to be capped because the structural reform follow-through that can put Nigeria on the path to a more sustainable long-term growth is missing.”


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