22 November 2015, Lagos – Amidst the consistent volatility at the nation’s capital market in recent times, there are indications that foreign portfolio investors have continued to exit the Nigerian economy in search of better deals in other jurisdiction.
This indication was given in a report by the Nigerian Stock Exchange, which showed that foreign portfolio investors’ inflows accounted for only 22.52 per cent of total transactions while outflows accounted for 30.84 per cent of the total transactions in September 2015.
The exchange’s report also showed that in terms of value, portfolio investment transactions at the nation’s bourse decreased to N69.33 billion (about $0.35 billion) in September 2015 from N81.13 billion (about $0.41 billion) at the end of August 2015; representing a decrease of 14.54 per cent.
The FPI outflow includes sales transactions or liquidation of portfolio investments through the stock market, whilst the FPI inflow includes purchase transactions on the Nigerian Stock Exchange (Equities only). The August 2015 and September 2014 transactions are included for comparison to the September 2015 transactions.
On a monthly basis, The Nigerian Stock Exchange polls trading figures from major custodians and market operators on their foreign portfolio investments (FPI).
The NSE in its report on domestic and foreign participation in equity trading for the month of September also showed that domestic investors conceded about 6.72 per cent of trading to foreign investors compared to the 11.38 per cent they conceded in the previous month as domestic transactions increased from 44.31per cent to 46.64 per cent.
In comparison to the same period in 2014, total FPI transactions decreased by 69.42 per cent, whilst the total domestic transactions decreased by 79.53 per cent. FPI outflows outpaced inflows, which was not consistent with the same period in 2014. Overall, there was a 75.15 per cent decrease in total transactions in comparison to the same period in 2014.
The report also showed that total domestic transactions decreased by 33.13 per cent from January to September 2015. The institutional composition of the domestic market, which was about 33.69 per cent at the end of January increased to 59.32 percent at the end of September, whilst the retail composition decreased from 66.31per cent to 40.68 per cent in the same period.
Historically, total FPI transactions of N616 billion, which accounted for 14.8 per cent of total transactions in 2007 increased over the years to N1.539 billion, representing 57.5 per cent of total transactions in 2014 (An increase of 42.7 per cent over the seven year period).
Domestic transactions on the other hand started at N3.556 billion, representing 85.2 per cent in 2007, but decreased significantly to N1.137 billion representing 42.5 per cent of total transactions in 2014 (A sharp decline of 42.7 per cent in the seven year period).
The exchange explained that information on the retail and institutional components of the total domestic transactions in September is based on data obtained from about 95 per cent of active dealing members of The Exchange.
Market watchers said the decline in the participation of foreign portfolio investors in transactions on the floor of the Nigerian Stock Exchange may continue till the first quarter of next year in view of the rising macroeconomic risks and regulatory crackdown on some listed companies.
A capital market analyst, who spoke on condition of anonymity, said foreign investors are wary of the Nigerian market because of the spate of sanctions on organisations like Stanbic IBTC, First Bank Plc, United Bank for Africa Plc and Skye Bank Plc.
Their fears, according to the source, stemmed from the feelings that the regime of fines could negatively affect the returns of these affected companies by the time their full year results are being computed.