Foreign transactions in the Nigerian equities market soared by 97.88 per cent from N616 billion to N1.219 trillion in the last 12 years, figures released yesterday by the Nigerian Stock Exchange (NSE) have shown.
The jump, which is between 2007 and 2018, indicated foreign investors’ preference for the Nigerian equities market.
However, while foreign investors increased their investments, their domestic counterparts’ participation declined in the review period, falling by 66.6 per cent from N3.556 trillion in 2007 to N1.185 trillion in 2018.
In 2018 alone for instance, foreign transactions accounted for 51 per cent while domestic investors accounted for 49 per cent. But the bearish trend that charaterised the market since the 2018 and into 2019, which saw the exit of some investors, made more domestic investors to come into the market. Consequently, domestic transactions between January and September 2019 stood at N775.51 billion, while foreign transactions stood to N688.9 billion.
In September alone, total transactions stood at N141.45 billion, showing an increase of 15 per cent above the N121.99 billion invested in August. However, foreign transactions dominated in the month, accounting for N94.45 billion, while domestic transactions accounted for N47 billion.
The figures also showed that Nigerian domestic investors sold more shares than they bought in September as inflow stood at N22.13 billion, while outflow was N24.87 billion.
On the other hand, foreign investors bought more shares than they sold because inflow stood at N47.73 billion, while outflow was N46.72 billion.
A further analysis of domestic transactions in September showed that retail transactions decreased by 2.34 per cent from N23.92 billion in August 2019 to N23.36 billion. Similarly, the institutional composition of the domestic market declined more significantly by 30.8 per cent from N34.17 billion in August 2019 to N23.64billion in September2019.
Commenting on the foreign participation in the market, Managing Director, APT Securities & Funds Limited, Mr. Kasimu Kurfi, said most foreign investors understood and played better in the Nigerian investment market because of their access to information than their domestic counterparts.
He said the need to raise funds to meet financing needs in preparation for resumption of schools, must have put pressure on domestic investors to sell more shares in September.
In his comments, a financial analysts and CEO, B.A. Adedipe Consult, Dr. Abiodun Adedipe, said foreign investors come into the Nigerian market because they see the kind of yields they cannot find else.
“However, the same thing plays out when they want to move because as soon as they have a reason to suspect that the environment will bring their return to a risk, they will also leave. The foreign investors monitor the market closer than the way we do. Besides, the domestic investors here are mostly retail investors and they often take time to respond to market stimulus,” Adedipe said.
Chief Executive Officer, Sofunix Investment and Communications, Mr. Sola Oni, said strong fundamentals and undervaluation of Nigerian equities made them attractive to investors, adding that clearer economic and political directions have further reduced Nigerian macro risks and made Nigerian securities more attractive.