Foreign portfolio investment in Nigerian equities market sustains declining trend in three year

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In the last three years, the third quarter ended September 30, 2021 being the benchmark, foreign portfolio investment in the Nigerian equities market, has recorded a noticeable drop as investors, since the third quarter of 2019 reduced their investment in Africa’s largest economy by 58.3%. There are no clear indications that the trend will change any time soon as the economy continues to struggle for survival. BAMIDELE FAMOOFO reports.

Uba Group

Analysis of the performance of foreign portfolio investment in the Nigerian Exchange Limited carried out by the business desk of The Point, has shown that Nigeria is losing money from foreign sources as portfolio investment from foreigners in Nigerian companies listed on the Exchange is fast dwindling.

As at third quarter ended September 31, 2021, total foreign portfolio investment in three years recorded a drop to the tune of -58.3% from N688.91billion in third quarter ended September 30, 2019 to N287.2billion as at September 30, 2021, year-to-date.

Both foreign inflow and outflow in foreign portfolio investment also went the south direction in the review period as capital inflow from foreign investors dropped by -58.5% from N326 Billion YTD as at September 30, 2019 to N135.39billion as at end of third quarter ended September 30, 2021.

Capital outflow from foreign investors has also continued to shrink as foreign outflow dropped to N151.81billion as at September 30, 2021 (YTD) from N362.91 billion in the comparable period in 2019.

On the flipside, however, domestic investment from both retail and institutional domestic investors increased by 38.2% from N775.51billion as at third quarter in 2019 (YTD) to N1.05trillion as at third quarter in 2021.

Aggregate turnover of foreign portfolio investment and domestic investment in three years stood at N4.14trillion with domestic investment buoyed by the performance of institutional investors accounting for N2.65trillion representing 64% in three years while foreign portfolio investment accounts for only about 36% in three years. Total foreign outflow exceeded inflow at N849.66billion compared with N636.7billion in outflow in three years.

Quarterly performance review

2021

On a monthly basis, Nigerian Exchange Limited polls trading figures from market operators on their domestic and foreign portfolio investment flows. As at 30 September 2021, total transactions at the nation’s bourse increased by 32.13% from N89.42billion (about $217.53million) in August 2021 to N118.15billion (about $285.81million) in September 2021.

The performance as at September when compared to the performance in September 2020 (N134.97 billion) revealed that total transactions decreased by 12.46%. In September 2021, the total value of transactions executed by domestic investors outperformed transactions executed by foreign investors by circa 58%.

“Aggregate turnover of foreign portfolio investment and domestic investment in three years stood at N4.14trillion with domestic investment buoyed by the performance of institutional investors accounting for N2.65trillion representing 64% in three years while foreign portfolio investment accounts for only about 36% in three years

A further analysis of the total transactions executed between the month of September and prior month (August 2021) revealed that total domestic transactions increased by 46.43% from N64.06billion in August to N93.80billion in September 2021. However, total foreign transactions decreased by 3.98% from N25.36billion (about $61.69million) to N24.35billion (about $58.91million) between August 2021 and September 2021.

Institutional Investors outperformed Retail Investors by 32%. A comparison of domestic transactions in the current and prior month (August 2021) revealed that retail transactions decreased by 0.41% from N31.89billion in August 2021 to N31.76billion in September 2021. However, the institutional composition of the domestic market increased by 92.85% from N32.17billion in August 2021 to N62.04billion in September 2021.

Over a 14 year period, domestic transactions decreased by 59.54% from N3.556 trillion in 2007 to N1.439 trillion in 2020 whilst foreign transactions increased by 18.45% from N616billion to N729 Billion over the same period.

Total domestic transactions accounted for about 74% of the total transactions carried out in 2020, whilst foreign transactions accounted for about 26% of the total transactions in the same period.

The transaction data for 2021 showed that total foreign transactions are circa N287.20billion, whilst total domestic transactions are circa N1.045 trillion.

2020

As at 30 September 2020, total transactions at the nation’s bourse increased by 42.90% from N94.45billion (about $244.27million) in August 2020 to N134.97billion (about $349.85million) in September 2020.

The performance of the month of September in 2020 when compared to the performance in September 2019 (N141.45 billion) revealed that total transactions decreased by 4.58%. In September 2020, the total value of transactions executed by domestic investors outperformed transactions executed by foreign investors by circa 40%.

A further analysis of the total transactions executed between the month of September in 2020 and prior month (August 2020) revealed that total domestic transactions increased by 71.12% from N55.47billion in August to N94.92billion in September 2020. Total foreign transactions also increased by 2.74% from N38.98billion (about $100.81million) to N40.05billion (about $103.81million) between August and September 2020.

“A further analysis of the total transactions executed between the month of September and prior month (August 2019) revealed that total domestic transactions decreased by 19.91% from N58.69 billion in August to N47.00 billion in September 2019. However, total foreign transactions increased by 47.81% from N63.90 billion (about $208.4million) to N94.45 billion (about $308.2million) between August and September 2019”

Institutional investors outperformed Retail Investors by 24%. A comparison of domestic transactions in the current and prior month (August 2020) revealed that retail transactions increased by 34.12% from N26.61billion in August 2020 to N35.69billion in September 2020. Whilst the institutional composition of the domestic market increased by 105.23% from N28.86billion in August 2020 to N59.23billion in September 2020.

Over a 13 year period, domestic transactions decreased by 72.30% from N3.556tr in 2007 to N985bn in 2019 whilst foreign transactions increased by 53.08% from N616bn to N943bn over the same period. Total domestic transactions accounted for about 51% of the total transactions carried out in 2019, whilst foreign transactions accounted for about 49% of the total transactions in the same period. The actual performance referenced 2020A (2020 Actual) shows that total foreign transactions carried out year till date (YTD) is about N510.25billion whilst total domestic transactions YTD is about N825.94billion.

2019

As at 30 September 2019, total transactions at the nation’s bourse increased by 15.95% from N121.99 billion (about $398.0 million) in August 2019 to N141.45 billion (about $461.50 million) in September 2019. The performance of the month of September in 2019 when compared to the performance in the same period (September 2018) of the prior year revealed that total transactions increased by 8.64%. In September 2019, the total value of transactions executed by foreign investors outperformed transactions executed by domestic investors by 34.00%.

A further analysis of the total transactions executed between the month of September and prior month (August 2019) revealed that total domestic transactions decreased by 19.91% from N58.69 billion in August to N47.00 billion in September 2019. However, total foreign transactions increased by 47.81% from N63.90 billion (about $208.4million) to N94.45 billion (about $308.2million) between August and September 2019.

The value of domestic transactions executed by Institutional investors and retail investors were at par as. A comparison of domestic transactions in the current and prior month (August 2019) revealed that retail transactions decreased by 2.34% from N23.92 billion in August 2019 to N23.36 billion in September 2019. However, the institutional composition of the domestic market declined more significantly by 30.81% from N34.17 billion in August 2019 to N23.64 billion in September 2019.

Over a 12 year period, domestic transactions decreased by 66.68% from N3.556 trillion in 2007 to N1.185 trillion in 2018 whilst foreign transactions increased by 97.88% from N616 Million to N1.219 trillion over the same period. Total foreign transactions accounted for about 51% of the total transactions carried out in 2018, whilst domestic transactions accounted for about 49% of the total transactions in the same period. The actual performance referenced 2019A (2019 Actual) shows that total foreign transactions carried out year till date (YTD) as at September 2019 was about N688.91 billion whilst total domestic transactions YTD in the review period was about N775.51
billion.