FX issues, others deepen foreign apathy for stocks as patronage dips by 27.9%

. Domestic participation rises by 40% in one month
Lingering uncertainty, insecurity, sustained foreign exchange liquidity challenge and other macroeconomic hitches, have continued to depress foreign investors’ appetite for stocks, even as participation in the local bourse decreased by 27.9 per cent in one month from August 2024 to September 2024.

Despite prolonged hardship, local investors have continued to jostle for stocks with improved earnings and high dividend payout ahead of the interim dividend and 2024 full-year scorecards.

Indeed, foreign investors’ participation in the local bourse has since moderated in recent years majorly due to FX issues, which have affected their ability to repatriate their dividends, coupled with monetary policy issues, which has reduced their turnover from N57.47 billion in August 2024 to N41.4 billion in September 2024, according to the September 2024 edition of the domestic and foreign portfolio investment report of the exchange.

A breakdown of the report showed that total transactions executed between the current (September) and prior month (August 2024) revealed that total domestic transactions increased by 40.23 per cent from N322.05 billion in August 2024 to N451.60 billion in September 2024.

However, total foreign transactions decreased by 27.95 per cent from N57.47 billion to N41.41 billion between August 2024 and September 2024.

Further breakdown of the report showed that total domestic transactions accounted for about 89 per cent of the total transactions carried out in 2023, whilst foreign transactions accounted for about 11 per cent of the total transactions in the same period.

The 2024 data also revealed that total domestic transactions are N3.27 trillion, while total foreign transactions are N696.88 billion.

The positive domestic investor sentiments, according to analysts, have been driven by strong earnings and interim dividend payout announced by companies in the wake of the earning season.

As of September 30, 2024, total transactions at the nation’s bourse increased significantly by 29.90 per cent from N379.5 billion in August 2024 to N493.01 billion in September 2024.

The performance of the current month when compared to that of September 2023 (N295.80 billion) revealed that total transactions increased by 66.7 per cent.

In the retail segment, retail investors outperformed institutional Investors by 28 per cent. A comparison of domestic transactions in the current month and the prior month (August 2024) revealed that retail transactions increased by 59.4 per cent from N180.7 billion in August 2024 to N288.10 billion in September 2024.

Also, the institutional composition of the domestic market increased by 15.7 per cent from N141.33 billion in August 2024 to N163.50 billion in September 2024.

Over 17 years, domestic transactions decreased by 10.9 per cent from N3.6 trillion in 2007 to N3.2 trillion in 2023; whilst foreign transactions also decreased by 33.3 per cent from N616 billion to N411 billion over the same period.

Reacting to the development, President of NewDimension Shareholders Association of Nigeria, Patrick Ajudua, said foreign investors can only invest in a country where their return on their investment is guaranteed, with a conducive business environment that would enable them to repatriate their dividend seamlessly.

“Here in Nigeria, the reverse is the case, hence they have decided to adopt a ‘wait and see’ approach. What we are witnessing now is foreign investors leaving the country.

“It’s very unfortunate, the government must quickly address their concerns to avoid this capital flight we are witnessing currently,” he said.