Nigeria’s portfolio transactions declined by N280 billion as foreign portfolio investors (FPIs) tended to be more on the sell side than the buy side.
Latest official transactional report on FPIs obtained at the weekend indicated that total foreign transactions at the Nigerian stock market dropped to N879.40 billion over the past 11 months , 24.1 per cent or N279.62 billion drop from N1.159 trillion recorded in comparable period of 2018.
The immediate past month also saw a reversal of the three-month consecutive increase in FPI transactions. FPI transactions dropped by 16.4 per cent or N16.97 billion to N86.76 billion in November 2019 as against N63.90 billion, N94.45 billion and N103.73 billion recorded in August, September and October 2019 respectively.
The FPIs report, coordinated by the Nigerian Stock Exchange (NSE), included transactions from nearly all custodians and capital market operators and it is widely regarded as a credible measure of foreign portfolio investment (FPI) trend. The report uses two key indicators-inflow and outflow, to gauge foreign investors’ mood and participation in the stock market as a barometer for the economy.
Foreign portfolio outflow includes sales transactions or liquidation of equity portfolio investments through the stock market while inflow includes purchase transactions on the NSE. Segmental analysis delineates the proportion of foreign to local participation, institutional to retail investors as well as the momentum of activities among others.
The report further indicated that Nigeria remained mostly on the sell side of foreign transactions with FPI deficit of N84.52 billion over the past 11 months. Foreign outflows stood at N481.96 billion as against inflows of N397.44 billion during the period. In November 2019, foreign outflows stood at N53.17 billion as against inflows of N33.59 billion, representing a deficit of N19.58 billion for the month.
In the first half of this year, total foreign transactions for the six-month period ended June 30, 2019 had stood at N472.78 billion, a decline of 40.9 per cent from N799.70 billion recorded in the comparable period of 2018. Alongside the steep decline in foreign transactions, foreign outflows had also continued to outpace inflows with net foreign portfolio investment (FPI) deficit rising from N38.41 billion in first half of 2018 to N42.84 billion in 2019.
Foreign inflows dropped from N380.65 billion in first half 2018 to N214.97 billion in first half 2019 while foreign outflows also declined from N419.06 billion in first half 2018 to N257.81 billion in first half 2019.
Market analysts attributed the decline to political risk, fluctuations in the global financial markets and weak macroeconomic fundamentals. Nigeria held its general elections in March 2019, with pre and post elections ripples beclouding the investment market.