Foreign investments slide by N434bn in nine months

Foreign investors’ interest in the Nigerian capital market has drastically dropped by N433.78 billion in the first nine months of 2016.
According to the latest Nigerian Stock Exchange’s September trading figures, polls from major custodians and market operators on Foreign Portfolio Investment flows, foreign investors’ transactions dropped from N846.92 billion in January to N413.14 billion by end of September, representing a 51.22 per cent slide.
The FPI outflow includes sales transactions or liquidation of portfolio investments through the stock market, whilst the FPI inflow includes purchase transactions on the NSE on equities only.
Financial analysts attributed the development to the instability in foreign exchange currencies, most especially the naira against the dollar, as it scares foreign investors from the stock market.
Managing Director, APT Securities and Funds Limited, Mallam Kasimu Kurfi, explained that the resistance of Central Bank of Nigeria to devalue the naira discouraged foreign investors.
According to him, by the end of second quarter of 2016, the foreign exchange inflows reduce from $2.67 billion within the same period in 2015 to $0.65 billion, translating to a drop of 75 per cent.
“As at now, foreign investors play just about 40 per cent of the market, from above 50 per cent in the previous year. The few foreign investors that play the market are doing that because they can’t sources forex to write draw their funds. It is necessary for the CBN to review its policies if it has to attract foreign investors,” he said.
Another financial analyst, Mr. Bodunrin Babajide, blamed the current economic situation on CBN’s exchange rate policy and acute forex shortages. He believed that if the apex bank can solve the problem of foreign exchange, foreign investors will return to the country.
He said, “The Securities and Exchange Commission and NSE should design modalities that will help the local investor to be the king in Nigerian capital market. If regulators can work towards increasing local investors’ confidence and improving domestic investors’ participation, our market will be better off.”
Meanwhile, at the end of September, foreign inflows outpaced outflows, as foreign inflows decreased by 29.65 per cent from N34.70 billion in August to N24.41 billion in September. Foreign outflows also decreased by 10.21 per cent from N21.36 billion to N19.18 billion within the same period. The total foreign transactions in September declined by N12.47 billion, representing 22.24 per cent, from N56.06 billion in August to N43.59 billion as at the end of September.
Both foreign and domestic activities are decreasing, however foreign activity is decreasing faster. Domestic investors outperformed their foreign counterparts by about 8 per cent, as domestic investors transacted N51.18 billion against N43.59 billion transacted by their foreign counterpart. Domestic transactions decreased by 16.98 per cent from N61.65 billion in August 2016 to N51.18 billion in September.