27 July 2015, Lagos – Nigeria may have lost about N304 billion to divestment by foreign investors, The Nation has learnt.
The figure, which represents over 50 per cent of capital outflow from the capital market, covers the first half of the year.
A report on foreign portfolio investment (FPI) for the first-half obtained at the weekend, indicated that about 52 per cent of total foreign transaction value during the six months were divestments, underlining the sell pressure being experienced at the stock market.
Total foreign portfolio investment outflow during the period stood at N303.59 billion as against inflow of N285.40 billion, representing a deficit of N18.2 billion. The half-year deficit represents a relatively larger value given the significant undervaluation of the Nigerian equities and the extended deficit Nigeria had suffered since 2013.
Nigeria had recorded a net foreign portfolio deficit of N154.14 billion in 2014, overriding a modest positive net flow of N20.48 billion recorded in 2013.The 12-month FPI report for last year had shown that foreign portfolio outflow was N846.53 billion as against inflow of N692.39 billion in 2014. In 2013, total foreign inflow stood at N531.26 billion compared with outflow of N510.78 billion.
The FPI report, which is coordinated by the Nigerian Stock Exchange (NSE), used two key indicators-inflow and outflow, to gauge foreign investors’ mood and participation in the stock market as a barometer for the economy.
FPI outflow includes sales transactions or liquidation of equity portfolio investments through the stock market while inflow includes purchase transactions on the NSE. The NSE report is regarded as a credible gauge of foreign portfolio investments in Nigeria as it coordinates data from nearly all active and major investment bankers, stockbrokers, custodians and other capital market operators.
The report for the period ended June 30, this year showed that foreign portfolio investors accounted for about 53 per cent of total transaction value while domestic investors accounted for 47 per cent. Total transactions stood at N1.114 trillion, with domestic investors accounting for N525 billion.
The report, however, showed a month-on-month recovery in June. Total foreign inflow stood at N42.67 billion as against outflow of N26.98 billion in June, totaling N69.65 billion. Total transactions stood at N203.45 billion, with domestic investors contributing N133.80 billion. The foreign-domestic ratio stood at 34.24 per cent/65.76 per cent in June.
In May, total foreign inflow had stood at N38 billion as against outflow of N41.77 billion, totaling N79.77 billion. Total transactions thus stood at N145.45 billion, with domestic investors accounting for N65.68 billion. Foreign investors accounted for 54.84 per cent while domestic investors accounted for 45.16 per cent.
The market had recorded its first positive flow in April, after successive declines in the first quarter. Total foreign inflow rose to N54.20 billion in April as against outflow of N49.75 billion, representing a modest positive net inflow of about N4.45 billion. Total foreign transactions thus stood at N103.95 billion as against total domestic transactions of N102.91 billion during the month.
In March, foreign portfolio outflows of N52.41 billion outpaced inflows of N50.15 billion. The first quarter had seen steady foreign portfolio deficits as investors weighed macroeconomic and political risks. Foreign outflows totaled N81.60 billion in February 2015 as against inflow of N52.35 billion, indicating a significant increase on the downtrend that started the year when foreign portfolio outflow was N51.08 billion against inflow of N48.03 billion.
The 12-month foreign portfolio investment report for 2014 had shown that foreign portfolio outflow was N846.53 billion as against inflow of N692.39 billion in 2014, representing a net deficit of N154.14 billion. In 2013, total foreign inflow stood at N531.26 trillion compared with outflow of N510.78 trillion, leaving a positive balance of N20.48 billion.
Market analysts attributed the largely negative topsy-turvy situation at the capital market to pre-election concerns and existing concerns over the macroeconomic and monetary policy direction of the new government.
Insecurity, poor infrastructure and inclement operating environment had also combined to shave corporate earnings, which dampened investors’ appetite.
*Taofik Salako – Nation