• Login
  • Register
Nairametrics
  • Home
  • Exclusives
    • Financial Analysis
    • Corporate Stories
    • Interviews
    • Investigations
    • Metrics
    • Economy
    • Nairalytics
  • Markets
    • Currencies
    • Cryptos
    • Commodities
    • Equities
      • Company Results
      • Dividends
      • Stock Market
    • Fixed Income
    • Market Views
    • Securities
  • Sectors
    • Agriculture
    • Aviation
    • Company News
    • Consumer Goods
    • Corporate Updates
    • Corporate deals
    • Corporate Press Releases
    • Energy
    • Entertainment
    • Financial Services
    • Health
    • Hospitality & Travel
    • Manufacturing
    • Real Estate and Construction
    • Renewables & Sustainability
    • Tech News
  • Business News
    • Budget
    • Public Debt
    • Funds Management
    • Tax
  • Financial Literacy
    • Career tips
    • Personal Finance
  • Lifestyle
    • Billionaire Watch
    • Profiles
  • Opinions
    • Blurb
    • Op-Eds
    • Research Analysis
  • Recapitalization
    • Access Holdings Offer
    • Fidelity Bank Offer
    • GTCO Offer
    • Zenith Bank Offer
  • Home
  • Exclusives
    • Financial Analysis
    • Corporate Stories
    • Interviews
    • Investigations
    • Metrics
    • Economy
    • Nairalytics
  • Markets
    • Currencies
    • Cryptos
    • Commodities
    • Equities
      • Company Results
      • Dividends
      • Stock Market
    • Fixed Income
    • Market Views
    • Securities
  • Sectors
    • Agriculture
    • Aviation
    • Company News
    • Consumer Goods
    • Corporate Updates
    • Corporate deals
    • Corporate Press Releases
    • Energy
    • Entertainment
    • Financial Services
    • Health
    • Hospitality & Travel
    • Manufacturing
    • Real Estate and Construction
    • Renewables & Sustainability
    • Tech News
  • Business News
    • Budget
    • Public Debt
    • Funds Management
    • Tax
  • Financial Literacy
    • Career tips
    • Personal Finance
  • Lifestyle
    • Billionaire Watch
    • Profiles
  • Opinions
    • Blurb
    • Op-Eds
    • Research Analysis
  • Recapitalization
    • Access Holdings Offer
    • Fidelity Bank Offer
    • GTCO Offer
    • Zenith Bank Offer
Nairametrics
No Result
View All Result
Home Markets Currencies

Exchange rate crisis drops foreign investor participation in stock market to 16.8%

Olumide Adesina by Olumide Adesina
December 14, 2022
in Currencies, Exclusives, Markets, Spotlight, Stock Market
How the naira is affecting Nigeria’s stocks market
Share on FacebookShare on TwitterShare on Linkedin

Nigeria’s exchange rate crisis had crashed foreign investor participation in the stock market to just 16.8% when compared to their domestic counterparts.

This is largely due to capital controls put in place by the central bank limiting currency repatriation as well as the disparity between the official and parallel market rates.

On Tuesday, the exchange rate between the naira and the dollar fluctuated between N444 and N446 to the dollar at the official market. However, the rate on the parallel market was N745 to the dollar.  

RelatedStories

FTN COCOA, UNITY BANK leads as NGX top gainers for the week

Weekly Market Wrap: All-Share Index rises 0.71% as select consumer and industrial goods stocks fuel rally 

June 15, 2025
Weekly Stock Update: Nigerian Exchange Group record growth w-o-w, up by 0.48%

BUA Cement gains over 7% as Nigerian stock market conquers new territory 

June 13, 2025

The parallel market, where the dollar is freely exchanged but at a premium of 80% to the official spot rate, is where many firms and investors buy dollars. 

In the meantime, the exchange rate conundrum is now negatively affecting Nigeria’s stock market. Although the naira’s official depreciation against the dollar this year is 4%, many international portfolio managers looking to repatriate funds from the country are unable to access that rate due to a scarcity of hard cash. 

Foreign investors yet to return: Foreign involvement in Africa’s largest economy has not yet returned to normal since the pandemic-induced capital flight. This is partly because of overvalued naira at the official market and the country’s unstable macroeconomic environment.  

  • Foreign portfolio investors’ participation in the Nigerian domestic stock market has decreased solely because of the country’s volatile foreign exchange market, which is mostly the result of subpar exchange rate management and declining foreign reserves.  
  • However, Nigeria’s Foreign Portfolio Investments, or FPIs, increased by 11.8% to N321.04 billion in the third quarter of 2022, or Q3’22, from N287.2 billion in the same period of 2021, or Q3’21. 
  • FPI is a measure of the value of foreign investments in Nigerian stocks. Despite being referred to as “hot money” because of the quick entry and leave, analysts believe the higher balance in the FPI position is due to the investors’ inability to withdraw their funds due to the lack of foreign exchange.

59% decline in foreign direct investment: In the meantime, domestic investors’ strong appetite has continued to outperform international investors in the Nigerian stock market. Total domestic transactions made up 77% of all transactions made in 2021, while overseas transactions made up 23% of all transactions made during that time. 

  • According to the YTD transaction data for 2022, there were N1.729 trillion in total domestic transactions and N349.59 billion in total foreign transactions.  
  • But since the start of the second half of the year, there has been a slowdown in overall market activity because of risk aversion ahead of the general election in 2023 and a lacklustre macroeconomic backdrop.  
  • For example, foreign transactions as a percentage of domestic transactions on the stock exchange is a paltry 16.8% year to date compared to 21.3% same period last year. 
  • In terms of total transactions, foreign investments are about N349 billion compared to N792 billion and N1 trillion in 2019 and 2018 respectively, when Nigeria was not facing a forex crisis.

Note that the elevated level of insecurity in Nigeria has partly also contributed to a 59% decline in foreign direct investment during the past 11 years. 

In a nutshell: Africa’s biggest economy is suffering from a sharp decline in foreign investments, both portfolio and direct investments, which has reduced FX liquidity.  

  • This has been made worse by the drop in export revenues, which is mostly attributable to the decline in crude export revenue despite an uptick in remittances from the diaspora and non-oil export receipts. 
  • The devaluation of the local currency might imply that domestic investors will want more cash to maintain their current standard of living from a local standpoint. And to do that, they may need to sell some of their stock.

This explains why the market has been under stagnant pressure in relative terms. This pattern might last for a while, except there is a convergence between the naira’s official and black market.

Why are they staying away: The central bank’s capital controls are a major disincentive for foreign investors who will like to easily repatriate their investments without any limitations. Since central bank policies limit forex outflows, it makes no sense for them to keep investing in Nigeria.

  • In addition, the hike in interest rates, especially in Western markets, has also forced most investors to move their funds back to the United States where rates have increased.
  • Also, to add that Nigeria’s inflation rate figure of around 21% is also a major disincentive for any foreign investor looking for decent returns.

Despite these challenges, the equities market seems to be holding up without them with the All Share Index posting two years of consecutive positive returns of 50% and 6.07% in 2020 and 2021 respectively.

  • The All Share Index is currently up 11% YTD in November and is likely to close positively this year.

This article has been updated to provide more information.


Follow us for Breaking News and Market Intelligence.
Tags: NairaNigerian stock market
Olumide Adesina

Olumide Adesina

Olumide Adesina is a financial market writer, analyst and investment trader. Message Olumide on Twitter @Olumidecapital

Related Posts

FTN COCOA, UNITY BANK leads as NGX top gainers for the week
Equities

Weekly Market Wrap: All-Share Index rises 0.71% as select consumer and industrial goods stocks fuel rally 

June 15, 2025
Weekly Stock Update: Nigerian Exchange Group record growth w-o-w, up by 0.48%
Equities

BUA Cement gains over 7% as Nigerian stock market conquers new territory 

June 13, 2025
Weekly Stock Update: Nigerian Exchange Group record growth w-o-w, up by 0.48%
Equities

DAARCOMM, two other companies gain 10% as All-Share Index dips, GTCO lead value 

June 11, 2025
Naira , dollar, exchange rate
Currencies

Naira holds below N1,600/$ in the holidays

June 10, 2025
Weekly Stock Update: Nigerian Exchange Group record growth w-o-w, up by 0.48%
Equities

Nigerian Stock Market hits new record as June rally pops 

June 7, 2025
OPEC, crude oil production
Energy

Jitters for Naira as OPEC+ increases production quota by 411,000 barrels per day  

May 31, 2025
Next Post
Substandard Goods: SON to stop registration of products with similar names to popular products

Naira depreciation forcing review of Standard Organisation Act- FG

Leave a Reply Cancel reply

Your email address will not be published. Required fields are marked *

Emple
nlng
first bank
Zenth Bank








DUNS

Recent News

  • DMO allots N4.01 billion in FGN Savings Bonds for June 2025  
  • UNFPA: 90% of Nigerian women aged 50 and above had fewer children than desired – Report
  • NIBSS unveils National Payment Stack to revolutionize instant payment in Nigeria 

Follow us on social media:

Recent News

FGN Bonds, bond, DMO set to auction N150 billion in FGN Bonds to investors , FGN Bond for February 2020 oversubscribed by investors, DMO suspends April 2020 FGN savings bond offer

DMO allots N4.01 billion in FGN Savings Bonds for June 2025  

June 18, 2025
Global mortality of children under-5 drops to 4.9 million, progress remains slow- UN Report 

UNFPA: 90% of Nigerian women aged 50 and above had fewer children than desired – Report

June 18, 2025
  • iOS App
  • Android App
  • Contact Us
  • Home
  • Markets
  • Sectors
  • Economy
  • Business News
  • Financial Literacy
  • Disclaimer
  • Ads Disclaimer
  • Copyright Infringement

© 2025 Nairametrics

Welcome Back!

Login to your account below

Forgotten Password? Sign Up

Create New Account!

Fill the forms below to register

All fields are required. Log In

Retrieve your password

Please enter your username or email address to reset your password.

Log In
Social Media Auto Publish Powered By : XYZScripts.com
No Result
View All Result
  • Home
  • Exclusives
    • Financial Analysis
    • Corporate Stories
    • Interviews
    • Investigations
    • Metrics
    • Economy
    • Nairalytics
  • Markets
    • Currencies
    • Cryptos
    • Commodities
    • Equities
      • Company Results
      • Dividends
      • Stock Market
    • Fixed Income
    • Market Views
    • Securities
  • Sectors
    • Agriculture
    • Aviation
    • Company News
    • Consumer Goods
    • Corporate Updates
    • Corporate deals
    • Corporate Press Releases
    • Energy
    • Entertainment
    • Financial Services
    • Health
    • Hospitality & Travel
    • Manufacturing
    • Real Estate and Construction
    • Renewables & Sustainability
    • Tech News
  • Business News
    • Budget
    • Public Debt
    • Funds Management
    • Tax
  • Financial Literacy
    • Career tips
    • Personal Finance
  • Lifestyle
    • Billionaire Watch
    • Profiles
  • Opinions
    • Blurb
    • Op-Eds
    • Research Analysis
  • Recapitalization
    • Access Holdings Offer
    • Fidelity Bank Offer
    • GTCO Offer
    • Zenith Bank Offer
  • Login
  • Sign Up

© 2025 Nairametrics