Financial analysts at Cowry Asset Management Limited have stressed the need for the government to implement strategic policies that will sustain ongoing reforms and stabilise the exchange rate to boost investor confidence, particularly among foreign investors.
They noted that while domestic transactions have grown by 33.2 per cent and foreign transactions by 38.3 per cent over the past 18 years, foreign investor participation remains low due to global economic uncertainties and monetary tightening in advanced economies.
According to the experts, total transactions in the Nigerian Exchange amounted to N442.34 billion in November 2024, with foreign participation declining to 9.26 per cent (N40.94 billion).
The experts said the drop was largely attributed to the aggressive interest rate hikes in developed markets, which made their financial instruments more attractive to global investors. Meanwhile, domestic investors remained dominant, contributing 90.7 per cent (N401.4 billion) of market transactions.
However, in December 2024, the market experienced a significant boost, with transactions surging to N673.7 billion. As a result, foreign investor participation saw a modest increase to 9.91 per cent (N66.75 billion), while domestic investors accounted for 90.1 per cent (N606.91 billion).
The analysts attributed this renewed market confidence to strong domestic institutional participation as local institutional investors, including pension funds and asset managers, continued to dominate the market, providing much-needed liquidity.
Also, improved FX stability resulted in the naira stabilising at N1,543.9/$, reducing currency risks that often deter foreign portfolio investors.
In addition, the government’s $2.2 billion Eurobond issuance helped to strengthen Nigeria’s foreign exchange reserves, which in turn increased investor confidence and supported capital inflows.
Looking ahead, analysts believe that sustained economic reforms, exchange rate stability, and consistent policies will be crucial in maintaining market momentum in 2025.
They argue that while domestic investors remain the backbone of the market, attracting foreign capital will be essential for long-term expansion and deepening market liquidity.
To achieve this, they suggested that policymakers should focus on strengthening regulatory frameworks to improve investor confidence, maintain macroeconomic stability, particularly in exchange rate management and inflation control and encourage foreign portfolio investment through incentives and policy transparency.
The analysts also noted that global economic conditions, monetary policies of major central banks and Nigeria’s local regulatory environment will shape investment decisions in 2025. Rising interest rates in the U.S. and Europe, geopolitical risks, and commodity price fluctuations will continue to impact investor sentiment.
Ultimately, they pointed out that policy consistency and a stable investment climate will be key to sustaining the positive trajectory witnessed in late 2024.
