Domestic Investors Dominate Nigerian Stock Market Amid Bearish Foreign Participation

The Nigerian stock market experienced a slowdown in trading activity in February 2025, as total market transactions dropped by 16.07% month-on-month. According to the Domestic and Foreign Portfolio Transactions Report, total transactions fell from ₦607.05 billion (about $410.84 million) in January to ₦509.47 billion (about $341.36 million) in February. This decline reflects reduced market activity compared to the previous month, with a notable drop in foreign participation.

Despite the month-on-month drop, the market showed remarkable year-on-year improvement, with total transactions in February 2025 rising by 42.36% from ₦357.88 billion in February 2024. This surge underscores the growing dominance of domestic investors, whose participation accounted for an overwhelming 84% of total market activity in February.

Domestic Investor Dominance

Domestic investor transactions accounted for ₦466.82 billion in February 2025, despite experiencing a 12.83% decline from January’s ₦535.54 billion. Domestic investors have continued to lead the market, with institutional investors contributing the largest share. Institutional transactions fell by 5.92%, from ₦268.19 billion in January to ₦252.31 billion in February. On the other hand, retail investors saw a sharper decline, with their transactions dropping by 19.76%, from ₦267.35 billion in January to ₦214.51 billion in February. This suggests a retreat from smaller individual investors in response to evolving market conditions.

Foreign Investor Participation Declines Sharply

Foreign investor activity, however, experienced a steep drop of 40.36%, declining from ₦71.51 billion (approximately $48.38 million) in January to ₦42.65 billion (about $28.57 million) in February. The sharp fall in foreign transactions reflects ongoing macroeconomic challenges, including concerns about foreign exchange volatility and geopolitical uncertainties that have deterred international investors from engaging in Nigeria’s equity market.

Historical Trends: Growing Confidence in Domestic Investment

The long-term trend indicates a consistent increase in domestic investor participation in the Nigerian equities market. Over the past two decades, domestic transactions have grown by 33.15%, rising from ₦3.56 trillion in 2007 to ₦4.74 trillion in 2024. In contrast, foreign transactions have seen a more modest increase of 38.31%, from ₦616 billion to ₦852 billion over the same period. However, foreign participation has remained significantly lower than domestic investment, with domestic investors accounting for 85% of total market transactions in 2024, and foreign investors contributing only 15%.

In 2025, this trend has continued, with domestic transactions totaling ₦1.002 trillion, compared to foreign transactions of just ₦114.16 billion.

Outlook: The Self-Reliance of Nigeria’s Equities Market

Cowry Research highlights the growing self-reliance of Nigeria’s stock market, driven largely by local investors. Despite the retreat of foreign investors, domestic participation remains robust, signaling strong confidence in the local bourse. Institutional investors continue to play a key role in driving market stability, although volatility is expected due to ongoing macroeconomic challenges.

As foreign investors remain cautious amidst global uncertainties, domestic investors are expected to remain the primary drivers of the Nigerian stock market in the foreseeable future. The continued dominance of local participation suggests that the market may continue to exhibit resilience, even in the face of external headwinds.

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Reporting by Naija247news in Lagos, Nigeria.