BY BAMIDELE FAMOOFO
Increasing activities of fund managers and some banks in the equities segment of the Nigerian Exchange Limited has been attributed to the rising prominence of domestic investors over their foreign counterparts.
For seven consecutive months, domestic portfolio investment has surpassed foreign portfolio investment on the NGX.
The NGX report for July showed that institutional investors outperformed their retail counterparts by a large margin of 14 percent and this shows the increasing activities of fund managers and some banks in the equities space as they continue to cherry-pick on some of the fundamentally sound tickets during the month.
The total transactions done by domestic investors on the floor of the Nigerian Exchange Limited grew by N1.490 trillion as against N273.16 billion recorded by foreign investors in the first seven months of 2022.
According to the Domestic and Foreign Portfolio Investment in July 2022 report which captured these transactions as well as trading figures from market operators, domestic transactions stood at N1.465 trillion in the first seven months of 2021 while foreign transactions stood at N435 billion in the same period.
This meant that total domestic transactions on the NGX grew by 1.70 per cent while foreign transactions dropped by 37.24 per cent. Although, the July report revealed that total transactions at the nation’s bourse decreased by 35.36 percent from N156.52billion (about $371.53million) in June 2022 to N101.18 billion (about $236.86 million) in July 2022, the performance of the current month however, when compared to the performance in July 2021 (N89.77 billion), total transactions increased by 12.71 per cent. Furthermore, the total value of transactions executed by domestic investors outperformed transactions executed by foreign investors by 42 per cent while domestic inflows and outflows stood at N36.97 billion and N34.53 billion respectively, in the month of July 2022.
“The total transactions done by domestic investors on the floor of the Nigerian Exchange Limited grew by N1.490 trillion as against N273.16 billion recorded by foreign investors in the first seven months of 2022”
On the flipside, foreign inflows recorded N13.68 billion while foreign outflows stood at N16 billion.
This decline, according to analysts, is due to the scarcity of FX currently bedeviling the economy.
Since the outbreak of COVID-19, inflows across capital importation, loans, diaspora remittances, exports, income from investments and other autonomous sources have been dwindling.
However, domestic investors have continued to hold its ground on the floor of the NGX despite rising inflation and currency volatility in the foreign exchange market, which remained key drivers of the domestic & foreign portfolio investment.
Over a 15- year period, domestic transactions had decreased by 58.80 per cent from N3.556 trillion in 2007 to N1.465 trillion in 2021 whilst foreign transactions also decreased by 29.38 per cent from N616 billion to N435 billion over the same period.
On the other hand, total domestic transactions accounted for about 77 per cent of the total transactions carried out in 2021, whilst foreign transactions accounted for about 23 per cent of the total transactions in the same period.
Away from the notion that foreign investors have always exhibited apathy during this time in a pre-election season when they opt to aggressively exit Nigerian equities with the institutional investors threading the same path, the declining sentiment in the market has paved the way for some reconsiderations and portfolio rebalancing efforts by these investors.
