Economists worry over Continued Decline in FPIs’ Participation in Nigeria’s Equity Trading …


Freshly released report by the Nigerian Exchange (NGX) on domestic and foreign portfolio participation in equities trading showed that total equities market transactions increased by 0.93% to N185.26 billion in March 2022 from N183.56 billion in February 2022.

When compared to March 2021, the result shows that total transactions decreased by 18.92% y-o-y.

Further analysis of the total transactions revealed that total domestic transactions increased by 3.59% m-o-m to N143.09billion in March from N138.13billion in February 2022, total foreign transactions decreased by 7.17% m- o- m to N42.17billion from N45.43billion in February 2022.

The decrease in total transaction was chiefly due to the very weak appetite of foreign portfolio investors (FPIs) which continue to decrease amid sustained fear of foreign exchange volatility eroding their returns on investment and insecurity currently being encountered in the country.

Foreign investors appeared to have their reservations about the Naira not being fairly priced against the greenback.

However, local investors seem to be taking position as companies’ Q1 year 2022 results is being released, as they accumulate more shares of some fundamentally sound stocks.

Notably, we saw local players participation in the equities market increased in March than in the February 2022.

Further breakdown showed that domestic institutional investors outperformed retail investors by 16%.

The m- o- m comparison of domestic transactions shows that retail transactions decreased by 1.27% to N60.61billion in March 2022 from N61.39billion in February 2022.

Meanwhile, the institutional composition of the domestic market m-o-m increased by 7.48% to N82.48billion in March 2022 from N76.74billion in February 2022.

The 2021 transaction data shows that domestic investors Contributed 77.24% of the total amount of transactions, whilst FPI contributed 22.73% 0f the total transactions in the same period, 2022 data revealed domestic transactions to be N563.29billion and FPI N129.01billion.

The ratio of total domestic transactions to total foreign transactions tilted remain 77:23 at the end of March 2022.

A further breakdown of the FPI transactions m-o-m showed that foreign portfolio inflows reduced to N16.37 billion (from N20.86 billion); Also, foreign portfolio outflows increased to 25.80 billion in March from N24.57 billion m-o-m in Feb 2022.

On the part of local investors, we saw increased stake in the equities market – their purchase transactions were N76.08 billion, higher than N67.01 billion worth of outflows.

equities market continue to be bullish in the first qurter of the year amid releases of the audited FY 2021 financial results.

This, was despite the dwindling level of participation by the foreign portfolio investors.

We expect that going forward the performance of the local bourse would chiefly depend on the percieved level of risk in the political space as well as the performance of companies in Q1 2022.