Foreign Stock Transactions Are Down 53%, While Domestic Trade Is Up N476 Billion

Tinubu's Policy Direction

Total foreign transactions on the Nigerian Exchange Limited (NGX) fell by 53.16 percent last month, indicating that prolonged FX illiquidity, uncertainty, and other macroeconomic difficulties are having an impact on the capital market.

According to the NGX’s Domestic and Foreign Portfolio Investment Report, between February 2023 and March 2023, foreign transactions decreased by 53.16 percent, from N19.62 billion (roughly $42.51 million) to N9.19 billion (roughly $19.94 million), while domestic transactions decreased by 19.06 percent, from N169.29 billion to N137.03 billion.

The paper states that in 2022, total domestic transactions accounted for around 84% of all transactions, while overseas transactions accounted for approximately 16% of all transactions.

Additionally, the 2023 transaction statistics showed that total domestic transactions were N476.52 billion while total international transactions were N53.71 billion. On February 5, 2023, there were N188.91 billion (about $409.72 million) in total transactions at the country’s stock exchange. As of March 31, 2023, there were N146.22 billion (around $317.09 million) in total transactions.

The evaluation of the month’s performance in comparison to March 2022 (N185.26 billion) showed a reduction of 21.07 percent in total transactions. In March 2023, domestic investors’ total value of deals surpassed foreign investors’ total value of transactions by 88%.

The FPI report’s further analysis revealed that institutional investors outpaced retail investors by 22%.

Retail transactions climbed by 51.85% from N34.79 billion in February to N52.83 billion in March 2023, according to a comparison of domestic transactions for the current month and the previous month (February 2023) in Nigeria.

Nevertheless, the institutional makeup of the domestic market dramatically shrank, falling from N134.5 billion in February 2023 to N84.2 billion in March 2023, a loss of 37.4%.

Domestic transactions fell by 45.3% over the course of 16 years, from N3.556 trillion in 2007 to N1.945 trillion in 2022, while foreign transactions likewise fell by 38.47%, from N616 billion to N379 billion.

Indeed, due to problems with foreign exchange liquidity and monetary policy, foreign participation in the local stock market has slowed down recently. On the other hand, domestic investor sentiment is likely to be positive as a result of the strong earnings and dividend payouts announced by companies following the earnings season.

Tajudeen Olayinka, the chief executive officer of Wyoming Capital and Partners, responded to the development by stating that Nigeria urgently needs foreign investment to help it through an adjustment program that will unavoidably be implemented after Buhari’s government.

He contends that for the nation to grow more vibrantly, there should be a healthy balance between domestic and foreign investment.

“The economy is yet to embark on a full transition programme, even though, government is in transition. And so, few foreign investors that still manage to participate in our market would need to exercise caution in their dealings, so that they are not caught in the web.”

According to David Adonri, vice president of Highcap Securities Limited, there are fewer foreign investors in Nigeria as a result of the acute currency shortage.

He claims that many of the immigrants have money that they are unable to send back. Adonri emphasized the rising political and economic concerns, noting that these can scare away international investors.

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