03 January 2016, Lagos — As investors in the Nigerian capital market re-strategise in the new year, the Nigerian Stock Exchange has said domestic investors conceded about 13.62 per cent of trading to foreign investors in the month of November last year; compared to the 1.46 per cent they conceded in the month of October 2015.
Consequently, domestic transactions decreased from 49.27 per cent to 43.19 per cent, while foreign portfolio investment transactions increased from 50.73 per cent to 56.81 per cent over the same period.
The stock market report also maintained that foreign portfolio investors’ inflows accounted for 24.94 per cent of total transactions while the outflows accounted for 31.87 per cent of the total transactions in November 2015.
“In comparison to the same period in 2014, total FPI transactions decreased by 55.32 per cent, whilst the total domestic transactions increased by 44.09 per cent. FPI outflows outpaced inflows, which was consistent with the same period in 2014.
Overall, there was a 36.35 per cent decrease in total transactions in comparison to the same period in 2014,” the report by the exchange stated.
On a monthly basis, The Nigerian Stock Exchange polls trading figures from major custodians and market operators on their foreign portfolio investments (FPI).
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 October 2015 and November 2014 transactions are included for comparison to the November 2015 transactions.
The domestic composition of transactions on the Exchange between January and November 2015 illustrate that total domestic transactions decreased by 39.08 per cent from January to November 2015.
The management of the stock exchange also explained that the institutional composition of the domestic market, which was about 33.69 per cent at the end of January increased to 47.17 per cent at the end of November, whilst the retail composition decreased from 66.31 per cent to 52.83 per cent in the same period.
Cumulatively, total FPI transactions of N616bn, which accounted for 14.8 per cent of total transactions in 2007 increased over the years to N1.539bn, representing 57.5per cent of total transactions in 2014 (An increase of 42.7per cent over the seven-year period).
Domestic transactions on the other hand started at N3.556bn, representing 85.2 per cent in 2007, but decreased significantly to N1.137bn representing 42.5 per cent of total transactions in 2014 (A sharp decline of 42.7per cent in the seven- year period).
According to the report by the exchange, information on the retail and institutional components of the total domestic transactions in November is based on data obtained from about 95 per cent of active dealing members of the Exchange.
Earlier last year, the report that foreign investors were exiting Nigeria in droves in search of better deals in other countries was a cause for concern. The report indicated that, as at September this year, foreign portfolio investors’ inflows accounted for only 22.52 percent of total transactions while outflows accounted for 30.84 percent of total transactions in the month.
It also shows that, in terms of value, portfolio investment transactions decreased to N69.33 billion (about $0.35 billion) in September from N81.13 billion (about $0.41 billion) recorded in August. This represents a decrease of 14.54 per cent.
The continuing exit of many foreign portfolio investors from Nigeria is bad news for the economy, especially coming at a time when Nigeria, Africa’s largest economy by Gross Domestic Product (GDP), is witnessing uncertainty and apparent lack of economic direction. We are not surprised at the gloomy report, despite many business opportunities that Nigeria can offer potential investors.
The fact is that foreign portfolio investors always invest in economies where there is ease for doing business and where there is a clear economic direction. Sadly, the socio-economic outlook in the country, in the thinking of foreign portfolio investors, seems to point in the opposite direction.
*Festus Akanbi – Thisday