Nigeria’s Foreign Portfolio Outflows Rise in 3months as Local Business Optimism Weakens

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    A taxi cab passes a giant advertising screen showing US dollar, British pound and euro foreign currency exchange rates on a busy city road in Lagos, Nigeria, on Wednesday, July 26, 2017. Nigeria's economy, which in 2016 suffered its first full-year recession since 1987, will probably return to growth in 2017. Photographer: Tom Saater/Bloomberg

    Exchange on domestic and foreign portfolio participation in equities trading for September 2018, showed that equities market transactions slowed due to the waned interest of the retail and
    domestic institutional investors despite the implemetation of the Multi Fund Pension Structure in July 2018, recent Nigerian Stock exchange reports seen by Naija247news revealed.

    Hence, the local bourse plunged by 5.97% to 32,766.37 index points in September 2018 (from 34,848.45 index points in
    August 2018).

    Further analysis showed that total transactions on the nation’s bourse further declined to N130.20 billion in September 2018 (from N133.84 billion in August 2018); of which FPI transactions grew to N84.33 billion (from N70.97 billion) while domestic transactions decreased to N45.87 billion (from N62.87 billion).

    However, foreign portflio outflows increased month-on-month (m-o-m) by 27.60% to N43.78 billion in September 2018, outstripping the m-o-m 10.58% increase in foreign portfolio inflows to N40.54 billion.

    Meanwhile, domestic institutional transactions increased m-o-m by 14.38% to N25.93 billion in September 2018;
    however, the retail transactions further declined m-o-m by 50.39% to N19.19 billion in September 2018.

    In the real sector, the Monthly Business Expectations survey report for October 2018, released by the Central Bank of Nigeria (CBN), showed that business owners were less optimistic about Nigeria’s macroeconomic outlook for the month of November 2018 than in the month of October 2018.

    The overall business confidence index for October and outlook for the following month (November) were positive, but moderated to 23.2 points (from 24.8 points optimisim level for September) and 64.4 points (from 64.5 points for October) respectively.

    Of the four sectors surveyed, three sectors showed that business owners’ optimism about the economy weakened in October 2018 as the ‘construction’, ‘services’ and ‘wholesale & retail trade’ sectors index points declined to 7.7 points (from 16.2 points), 25.3 points (from 28.8 points) and 25.3 points (from 26.0 points) respectively.

    Also, optimism of
    private businesses operating in the ‘construction’ sector and ‘services’ sector on the economy mellowed for the
    following month (November) as their respective index points moderated to 59.0 points (from 67.6 points) and
    65.0 points (from 67.9 points) respectively.

    The survey revealed that amongst other conditions, insufficient power supply, higher interest rate, unfavorable political climate and unclear economic laws continued to constrain business activity in the month of October 2018.

    Nevertheless, the volume of total order book and business activity in October remained positive as their index points improved to 17.4 points (from 16.0 points) and 18.8 points (from 15.2 points) respectively.

    The apex bank’s survey on businesses’ financial conditions (i.e. working capital) and average capacity utilization improved; their indices stood at 15.6 and 23.0 index points respectively in October 2018, when compared with the 11.6 and 18.3 points respectively recorded in September 2018.

    The general improvement in working capital could be partly attributed to the improved access to credit in the month under review; its index points rose to 42.7 in October (from 40.4 in September).

    The report also showed that
    most private sector players planned to embark on expansion plans, especially those in the ‘financial service’ sector
    and ‘wholesale & retail trade’ sector as their respective index points rose to 53.8 and 17.9 in October 2018 from
    44.1 and 16.7 in September 2018.

    The weaker optimism about Nigeria’s economy for November, as expressed by local businesses, was in tandem
    with our expectation amid weakened macro economic fundamentals.

    This, coupled with the sustained increase in
    FPIs’ outflow since July 2018, is expected to lead to further near term worsening of stock market performance.

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    Godwin Okafor is a Financial Journalist, Internet Social Entrepreneur and Founder of Naija247news Media Limited. He has over 16 years experience in financial journalism. His experience cuts across traditional and digital media. He started his journalism career at Business Day, Nigeria and founded Naija247news Media in 2010. Godwin holds a Bachelors degree in Industrial Relations and Personnel Management from the Lagos State University, Ojo, Lagos. He is an alumni of Lagos Business School and a Fellow of the University of Pennsylvania (Wharton Seminar for Business Journalists). Over the years, he has won a number of journalism awards. Godwin is the chairman of Emmerich Resources Limited, the publisher of Naija247news.

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