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Foreign investors’ inflows outpace outflows as election-fever wears off

The investment of foreign investors in the Nigerian equities market has risen by 61.4 percent in the second quarter of the year. This is the first time in 2019 that the recorded foreign portfolio investment in Nigeria has been positive.

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The investment of foreign investors in the Nigerian equities market has risen by 61.4 percent in the second quarter of the year. This is the first time in 2019 that the recorded foreign portfolio investment in Nigeria has been positive.

According to the Nigerian Stock Exchange (NSE), foreign inflow from foreign portfolio investors (FPIs) increased to N41.78 billion in April from N25.89 billion in March of the same period under review.

In the first quarter of the year, foreign portfolio investors made more outflow transactions than they invested in the country.

According to the stock market report on foreign investment, foreign portfolio inflows surpassed outflows by N6.64 billion in April, making it the first time the market will be experiencing positive growth in 2019.

Breakdown of foreign investment: Foreign portfolio inflows stood at N41.78 billion as against outflows of N35.14 billion, indicating 37.1 percent increase in total foreign transactions from N56.09 billion in March 2019 to N76.92 billion in April 2019. With more activities by foreign investors, who dominate transactions at the market, total transactions at the market consequently increased from N110.11 billion in March to N148.9 billion in April. Foreign investors accounted for 51.66 percent of total transactions in April as against 48.34 percent by domestic investors, thereby sustaining a familiar trend of foreign dominance.

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Local investors losing ground to foreigners: In recent years, local investors have begun to lose their grip on the Nigerian capital market after previously dominating for two years consecutively before 2018. The foreign investors are beginning to dominate the stock market even though the majority of the transactions are tilted towards outflows.

Having more of outflow transaction within the full-year reverses the positive net foreign portfolio investments of N336.94 billion recorded in 2017 with a negative net foreign portfolio deficit of N66.2 billion in 2018.

Foreign portfolio investors traded about N1.22 trillion last year, a marginal percentage point increase of about N1.21 trillion traded in 2017. Total transactions at the equities market had declined from N2.543 trillion in 2017 to N2.404 trillion last year. With these, foreign investors accounted for 50.87 percent of total transactions at the equities market in 2018 compared with 47.49 percent in 2017.

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While total transactions at the equities market declined last year FPIs showed sustained growth at N1.219 trillion in 2018, building on the 133 per cent growth that saw total FPI transactions rising to N1.208 trillion in 2017. Foreign investors had accounted for the largest transactions at the Nigerian stock market between 2011 and 2015, but were overtaken by domestic investors in 2016, who sustained their marginal lead in 2017.

Foreign transactions, which stood at N1.54 trillion in 2014, had declined considerably to N518 billion in 2016, before making a remarkable recovery to N1.208 trillion in 2017. Conversely, domestic investors, which had traded a high of N3.55 trillion in 2007, had shown considerable slowdown over the past 12 years, dropping by 66.67 percent to N1.185 trillion in 2018.

However, the report showed net FPI deficit of N66.2 billion in 2018 as against a surplus of N336.94 billion in 2017. Total foreign inflows in 2018 stood at N576.45 billion compared with outflows of N642.65 billion. Foreign inflows had in 2017 outpaced outflows at N772.25 billion and N435.31 billion respectively.

Why foreign investors are taking over: Domestic investors reduced their transaction. The amount of investment by local investors reduced to N1.185 trillion in 2018 as against N1.335 trillion in 2017, thereby accounting for 49.13 percent of total transactions in the equities market in 2018 compared with 52.51 percent in 2017.

Why this matters: Foreign inflows outperformed outflows in 2018, hitting N206.35 billion compared to outflows’ N175.47 billion in the first quarter of last year, only for the outflows to record N124.24 billion as against N97.63 billion of the inflows in 2019.

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In Q1 of 2019, Nigeria suffered a net deficit of N26.6 billion in foreign portfolio transactions due to political and macro-economic uncertainties which affected foreign investors confidence in Nigeria’s stock market. This is peculiar to election period in most countries. The rise in inflows right after the election period shows foreign investors’ confidence is gradually picking up.

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What you need to know: Foreign portfolio transactions recorded a negative balance of N26.6 billion in inflow and outflow transactions by foreign portfolio investors in first quarter 2019 compared with a positive balance of N30.88 billion recorded in the comparable period of 2018.

The report also showed that foreign portfolio transactions dropped by N159.95 billion in the first quarter of 2019, representing a decrease of 41.89 percent compared to the turnover in the first quarter of 2018. Total foreign portfolio transactions dropped from N381.82 billion in first quarter 2018 to N221.87 billion in first quarter 2019.

How the report is compiled: The transactions of major custodians and capital market operators are aggregated. The foreign portfolio outflow includes sales transactions or liquidation of equity portfolio investments through the stock market while inflow includes purchase transactions on the NSE.

Meanwhile, two key indicators-inflow and outflow, to gauge foreign investors’ mood and participation in the stock market as a barometer for the economy.

Olalekan is a certified media practitioner from the Nigerian Institute of Journalism (NIJ). In the era of media convergence, Olalekan is a valuable asset, with ability to curate and broadcast news. His zeal to write was developed out of passion to shape people’s thought and opinion; serving as a guideline for their daily lives. Contact for tips: [email protected]

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Financial Services

CBN grants Mortgage Refinancing Companies approval to refinance Non-member banks

The CBN has expanded access to mortgage financing by removing restrictions on refinancing mortgages earlier imposed.

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The Central Bank of Nigeria (CBN), has granted approval to Mortgage Refinancing Companies (MRC), to re-finance non-member banks.

This is contained in a circular referenced FPR/DIR/GEN/CIR/07/056 and signed by Ibrahim Tukur, the Director of Financial Policy and Regulation Department, CBN.

The circular improved on the earlier provisions contained in section 7.3.1.5 which states that “A mortgage refinance company (MRC) shall not, without the prior approval of the CBN, extend total outstanding credit to any single borrower, which is equal to or more than twenty times the value of the borrower’s shares with the MRC or 25 percent of its shareholders’ funds unimpaired by losses.”

READ MORE: Unity bank wants to be seen, but time is running low

READ: NFF receives $1 million from FIFA as COVID-19 palliative

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What this means

Based on the provisions contained in the latest circular, MRCs are now free and legally permitted to refinance the qualifying mortgages of banks and all other non-members ( that do not hold equity), subject to meeting all other relevant requirements specified in the framework.

In a nutshell, the restriction on non-member mortgage lenders from refinancing their mortgages with MRCs has been removed.

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READ: MFBs, DMBs, others get new lending limit directive from CBN

Why this matters

Prior to the provisions contained in the latest circular, CBN had expressed fears that provisions of section 7.3.1.5 negatively impacts the mortgages sub-sector, as it constrains the MRCS from refinancing the mortgages of non-shareholder banks. Therefore, the new order will help to remove the restrictions already highlighted.

In lieu of this, the latest circular stated that the provision of section 7.3.1 5 is hereby revised to “the MRC shall not, without prior approval of the CBN, extend total outstanding credit to any single borrower, which is equal to or more than 25 percent of its shareholders’ funds unimpaired by losses,” the circular reads.

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Business News

Nascon Allied Industries Plc: Increase in sale of goods boosts revenues

Nascon Allied Industries Plc recorded a boost from an increase in the sale of goods revenue-generating unit

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Nascon Allied Industries Plc: Increase in sale of goods boosts revenues

Nascon Allied Industries Plc recorded a boost from an increase in the sale of goods revenue-generating units, as total revenues increased slightly. The company reported revenues of N21.87 billion in 2020 (9months) – 4.01% increase compared to N21.03 billion in the corresponding period of 2019.

READ: Focus on Aluminium Extrusion Industries Plc and its declining 2019 performance

What you should know

Key highlights from 2020 (9months) results

  • Revenues increased by 4.01% from N21.03 billion to N21.87 billion YoY.
  • Revenues from sale of edible, refined, bulk grade salt; seasoning and vegetable oil, increased to N21.87 billion, +22.53% YoY.
  • Other income increased to N12.81 million, +27.43% YoY.
  • No revenue was recorded for freight income on the deliveries of salt and seasoning income-generating unit.
  • Gross profit increased to N8.96 billion, +74.56% YoY.
  • Operating profit increased to N3.64 billion +18.60% YoY.
  • Pre-tax profits increased to N3.47 billion, +16.63% YoY.
  • Post-tax profits increased to N2.29 billion, +13.27% YoY.
  • Earnings Per Share increased to 115 kobo, +12.75% YoY
  • Total assets increased to N44.36 billion, +45.79% YoY.
  • Total liabilities increased to N32.04 billion, +67.21% YoY.
  • Total equity increased to N12.32 billion, +9.35% YoY.

(READ MORE:Dangote’s NASCON Allied Industries Plc moves operation from Apapa)

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Bottomline

Nascon Allied Industries Plc recorded a boost from increase in sale of goods revenue-generating unit, but no revenue was recorded for its freight income on the deliveries of salt and seasoning revenue generating-unit.

READ: Food, Agro & Allied Industries set to export agri-products to New Zealand

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Though companies have generally recorded decreased revenues in the last three quarters, mostly due to COVID-19; Nascon Allied Industries Plc was able to increase its total revenues and pre-tax profits in the period under consideration.

READ: Nigeria Air: Domain name registration and N48 million controversy!

 

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Tech News

Instagram disables its “Recent” feature

Instagram recently announced it had removed the “recent” tab from hashtag pages on a temporary basis

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COVID-19: Instagram cracks down on coronavirus AR effects, Instagram Tenders apology for fagging #EndSARS fake, Instagram has disabled the “Recent” feature for the forthcoming U.S election,

Instagram disclosed that it would remove the “Recent” tab from its hashtag pages for people in the United States of America.

The social networking and video sharing service stated this on its official Twitter handle. It said it is “doing this to reduce the real-time spread of potentially harmful content that could pop up around the election.”

What you should know

Nairametrics had reported on Instagram’s apology for its algorithm malfunction that led to the flagging of #EndSARS posts as fake.

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Instagram has also taken the following measures to ensure a successful November election.

  • The registration of 4.4 million votes this year through its flagship platform – Instagram and Messenger.
  • Serving as a means of information and tool to people in the US on the electoral process
  • The ban of any content that can thwart the success of the election.

(READ MORE:U.S dollar stable amid U.S holiday)

Mark Zuckerberg, the CEO of Facebook, said he was perturbed about the high risks for civil unrest in the US due to the upcoming presidential election.

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“I’m worried that with our nation so divided and election results potentially taking days or weeks to be finalized, there is a risk of civil unrest across the country.”

Furthermore, he disclosed on a call while discussing Facebook’s Q3 earnings, that “given this, companies like ours need to go well beyond what we’ve done before.”

Why this matters

The aim of the short-term decision is to decrease the spread of misinformation in the forthcoming US election.

 

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