Investments in the Nigerian bourse recorded a noticeable improvement in the first quarter of 2024 with domestic and foreign portfolios rising by 192 percent to about N1.55 trillion compared with N530.23 billion in the first quarter of 2023.
Foreign portfolio investors were major contributors to the increase with a 297 percent growth year-on-year, from N53.71 billion as of March 2023, to N213.18 billion in the review period that ended March 31, 2023.
Notwithstanding the spike in foreign portfolio investment, domestic investors continue to hold sway, dominating activities in the equities market as of the end of March 2024.
Data obtained from the Nigerian Exchange Limited showed that domestic investors increased their portfolio size by 180 percent to N1.34 trillion from N476.52 billion as of March 31, 2023.
Foreign inflow increased from N18.12 billion in the first quarter of 2023 to N93.37 billion in the first quarter of 2024. On the flipside, foreign outflow increased to N119.81 billion from N35.59 billion in the first quarter of 2023.
Further breakdown showed that Domestic Retail investors increased their stakes in the market to the tune of 444 percent y/y, from N123.28 billion in March 2023 to N670.89 billion in the review period. Accordingly, Domestic Institutional investors increased their holdings by 88 percent y/y, from N353.24 billion to N663.87 billion as of March 2024.
Meanwhile, total transactions in the domestic equities market increased by 50.5 percent month-on-month to N538.54 billion in March (February: N292.07 billion).
“We attribute the improvement to the broad-based expansion across domestic (82.5% of market transactions) and foreign (17.5% of market transactions) inflows,” the NGX disclosed.
“Foreign portfolio investors were major contributors to the increase with a 297 percent growth year-on-year, from N53.71 billion as of March 2023, to N213.18 billion in the review period that ended March 31, 2023.”
On the one hand, domestic transactions rose by 52.1 percent m/m to N444.28 billion (February: N292.07 billion), underpinned by m/m growth across institutional and retail transactions of 69.8 percent m/m and 37.9 percent, respectively.
On the other hand, foreign transactions increased by 43.2 percent m/m to N94.26 billion (February: N65.81 billion) as foreign investors continued to increase exposures in the local bourse.
As a result, total domestic equities market transactions averaged N515.98 billion in Q1-24 (Q4-23: N288.50 billion (Q1-23: N176.74 billion).
Commenting experts at Cordros Research said, “While we expect domestic investors to continue to dominate market performance, we think buying activities will be constrained by expectations regarding an uptick in yields in the FI market. On the other hand, we believe that external risk due to uncertainties around the heightened geopolitical tensions and foreign investor concerns about CBN’s weak FX reserves amid the weak macroeconomic picture would limit foreign participation in the short term.”
Relatedly, based on the data obtained from FMDQ, total inflows into the Nigerian Autonomous Foreign Exchange Market (NAFEM) declined by 48.1 percent m/m to USD1.95 billion in April (March: USD3.75 billion).
The breakdown provided showed a broad-based decline across the local (75.4% of total inflows) and foreign sources (24.6%).
Expressly, local inflows declined by 33.6 percent m/m to USD1.47 billion (March: USD2.21 billion) due to weaker inflows from non-bank corporates (-47.4% m/m), CBN (-35.1% m/m), and Exporters (-19.1% m/m) amid substantial increases in Individuals’ inflows (+96.8% m/m).
Similarly, inflows from foreign sources came in lower, declining by 68.9 percent m/m to USD478.10 million (February: USD1.54 billion) as foreign investors began selling off risk assets to find safe havens amidst the lingering FX issues and weak macroeconomic environment.
“Looking ahead, we expect FX liquidity conditions to remain frail in the near term due to persistent demand-supply imbalances exacerbating distortions in the FX market. In addition, we think the elevated global interest rates and geopolitical tensions may keep foreign inflows subdued in the near term,” Cordros noted.
