‘Foreign participation in stockexchange outweighs local patronage for three months’

NSE trading floor, Lagos. SOURCE: Google

Latest portfolio investment report by the Nigerian Stock Exchange (NSE), has shown that transactions by foreign investors stood at 66.77 per cent in September, up from 52.38 per cent in the preceding month.

However, transactions by domestic investors were 33.23 per cent, down from 47.62 per cent in August.

Based on the foregoing, transactions by foreign investors outperformed those of their local counterparts by 34.00 per cent. Despite their continued divestments, the volume and value of their portfolio in the market remain enormous.

For the third consecutive month, foreign portfolio in the Nigerian equities market has been on the increase, while contribution by local investors has been on the decline since July.

For instance, total transactions on the NSE in September increased by 15.95 per cent to N141.45 billion, up from N121.99 billion, with foreign investors mostly responsible for this increase.

As at September 30, total transactions at the NSE rose 15.95 per cent from N121.99 billion (about $398.0 million) in August to N141.45 billion (about $461.50 million).

Further analysis show that in the last two months total domestic transactions fell 19.91per cent from N58.69 billion in August to N47.00 billion in September, while the foreign investors’ increased from N63.90 billion to N94.45 billion.

In July, total value of transactions executed by foreign investors was also higher than the domestic by 2.00 per cent. While the foreign stood at N57.78 billion, domestic was N25.44 billion.

The Stock Exchange tracks foreign and domestic portfolio investment on a monthly basis. Over the last 12 years, checks confirm that foreign transactions increased by 97.88 per cent, while domestic decreased by 66.68 per cent.

Note that the Nigerian capital market has witnessed enormous capital flight and selloffs by foreign investors in the past few years, owing to a gloomy macroeconomic outlook, and increasing political risks.

These selloffs have caused many blue chip companies quoted on the NSE to experienced huge losses within the period and further depressed the market.

Capital flight is the uncertain and rapid movement of large sums of money out of a country. The UK Overseas Development Institute (ODI) defines it as, “the outflow of resident capital which is motivated by economic and political uncertainty.”

Reacting to the market participation, the Managing Director, Crane Securities Limited, Mike Ezeh, noted said while foreign investors leverage market attractiveness due to the current low stock prices, the domestic ones remain on the sidelines as a result of apathy and loss of confidence.

“Foreign Investors are profit-oriented, even if the economy is dwindling and the market remains attractive due to low stock prices, they will enter, take position and immediately there is a little upward movement, they will take their money and offload all the stocks because they invest massively. They know the dynamics of the market, and invest through professional stockbrokers.”

Similarly, the President, Independence Shareholders Association, Adeniyi Adebisi, noted that local investors, who are basically retail investors, shy away from the market due to various crises and policies that had subjected them to hardship in time past.

“The domestic investors are being tackled in many ways. They are facing too many challenges in addition to the harsh economy. There are no incentives to woo them back to the market after the 2009 global financial crises.

“If the economy is doing well, and if there is any opportunity in the equities market, domestic investors will jump at it to savour good returns. Instead of getting dividend, the companies are delisting. What is the prospect of investing in the market?”

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Nigerian Stock Exchange
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