Investors’ confidence is key to every stakeholder of any equity market, as it determines whether the bourse would be dominated by either the bulls or bear. But how can such confidence (both local and foreign investors) be boosted or retained?
These were discussed at the recent virtual media round-table organised by the EFG Hermes Nigeria.
As far as the Chief Executive Officer, EFG Hermes Nigeria, Lilian Olubi, is concerned, the price-fixing regime in the foreign exchange (forex) market has been a deterrent to Foreign Portfolio Investors (FPIs). She called on the regulator to reduce focus on FX management.
She said, “We believe it portends a challenging situation for foreign portfolio investors, who in addition to the low yields are also dealing with FX shortages.
“For local investors, while the concern for negative real returns is apparent, it remains a market where they still have to hold most of their liquidity and this will continue as they anticipate new developments that would either boost the fixed income market while making some shift to equities and other asset classes.”
She further explained that there has been a focus on managing the foreign exchange price and the effect of that action has a huge effect on others on the market, including dampening investors’ confidence, asking the Central Bank of Nigeria (CBN) to liberalise the market.
In his own case, Chief Executive Officer, EFG Hermes Frontier, Ali Khalpey, explained that the FPIs showed little interest in the Nigerian equities market. He argued that the uncertainty around the forex rate and the possibility of repatriating dollars out of the country still posed serious challenges.
He said, “FPIs will not come knowing that the forex market is managed and not market reflected. It is very difficult to attract capital when you are dealing with such low yields and high inflations and then you still try to control the forex rate.”
What you should know
- As of 28 February 2021, total transactions at the nation’s bourse decreased by 7.26% from N232.46billion (about $590.82million) in January 2021 to N215.58billion (about $525.21million) in February 2021.
- The performance in February 2020 when compared to the performance in February 2021 (N148.50billion) revealed that total transactions increased by 45.17%. In February 2021, the total value of transactions executed by Domestic Investors outperformed transactions executed by Foreign Investors by circa 42%.
- Further analysis of the total transactions executed between the current and prior month (January 2021) revealed that total domestic transactions decreased by 17% from N184.94billion in January to N153.51billion in February 2021.
- However, total foreign transactions increased by 30.62% from N47.52billion (about $120.78million) to N62.07billion (about $151.23million) between January 2021 and February 2021.