Data from the Nigerian Exchange (NGX) reveals that foreign participation in the Nigerian equities market dropped to 8.15% in January 2024, a decline compared to 13.92% and 12.76% recorded in the previous and corresponding month of 2023.
Specifically, a total of N651.52 billion was recorded as transaction in the Nigerian stock market in January 2024, in contrast to the N343.9 billion traded in the previous month.
Out of the N651.52 billion, foreign portfolio investment accounted for N53.11 billion in the review period while domestic transaction was N598.41 billion.
Foreign investments in Nigeria have dwindled significantly in recent years, following the aftermath of the COVID-19 pandemic, and has since remained underwhelming largely because of FX instability and dollar illiquidity.
The inability of foreign investors to easily repatriate their earnings as at when due has been a limiting factor deterring the participation of foreign investors in the Nigerian market.
As a result of low foreign inflows and high demand for the greenbacks, the naira has depreciated by 41% and 21% YTD against the US dollar at the official and parallel market respectively.
The governor of the CBN, Yemi Cardoso engaged foreign portfolio investors last week to intimate them on some of the reforms by the apex bank to maintain price stability and liberalize the FX market in bid to instill confidence and attract fresh foreign investments.
While responding to questions from the various stakeholders, he highlighted some of the major actions taken by the CBN, which includes paying FX backlogs in excess of $2 billion.
The CBN governor noted that the bank has settled foreign exchange backlogs except for five commercial banks, while noting that the remaining will be settled in the coming days.
Recall that the Governor, earlier in February had revealed the genuine FX backlogs owed across economic sectors had dropped to $2.2 billion, with about $2.4 billion being invalid.
Some of the key take ways from the meeting include:
According to Victor Onyema, Lead, Portfolio Management Norrenberger Asset Management, there is some encouragement with the CBN’s recent efforts to restore market confidence and enhance communication with investors. This proactive approach is likely to generate renewed interest in the Nigerian investment landscape, particularly amongst Foreign Portfolio Investors (FPIs).
