Domestic stock transactions dip by 45.3% in 16 years

Total transactions decline by 62.7% in one month
Domestic transactions on the Nigerian Exchange Limited (NGX) fell by 45.3 per cent within a 16-year period, from N3.6 trillion in 2007 to N1.9 trillion in 2022, the latest Domestic and Foreign Portfolio Investment (FPI) report has shown.

According to the report, while domestic transactions fell by 45.3 per cent, foreign transactions also decreased by 38.5 per cent from N616 billion to N379 billion in the period.

Also, as of 31 August 2023, total transactions at the country’s bourse fell by 62.7 per cent, from N702.9 billion (about $991.91 million) in July 2023 to N262.56 billion in August.

Indeed, the economy has been grappling with a multiplicity of challenges arising from insecurity, high inflation, foreign exchange (FX) shortage, low output growth and balance of payment crisis among others.

Capital flight triggered by legacy FX illiquidity, inflation, rising insecurity and uncertainty in the economy have continued to take a toll on overall investment in the NGX.

The prolonged exposure to naira depreciation has compelled investors to shun the Nigerian market. In August 2023, the headline inflation increased to 25.8 per cent relative to July’s 24.08 per cent. Looking at the movement, the August 2023 headline inflation rate shows an increase of 1.72 per cent points when compared to July.

Vice President of High Cap Securities, David Adonri, urged policymakers to leverage available data to restructure the economy towards long-term productive activities where the capital market is most relevant in boosting local production and attracting investment.

For the economy to grow sustainably and enable the capital market to play its crucial role, he noted, inflation and interest rates must be in the lower single digits.

Adonri also pointed out that the market must be representative of all sectors of the economy, saying policies and programmes must be in place to reactivate the primary market where capital formation occurs.

Further breakdown of the total transactions executed between the current (August 2023) and prior month (July 2023) revealed that total domestic transactions decreased by 65.9 per cent, from N662.4 billion in July to N225.4 billion last month.

In the same vein, total foreign transactions decreased by 8.34 per cent, from N40.54 billion to N37.16 billion in the period. The total value of transactions executed by domestic investors in August 2023 outperformed transactions executed by foreign investors by circa 72 per cent.

Similarly, total domestic transactions accounted for about 84 per cent of the total transactions carried out in 2022. The exchange also revealed that institutional investors outperformed retail by 14 per cent while a comparison of domestic transactions last and the previous month (July 2023) revealed that retail transactions decreased by 57.8 per cent, from N229.9 billion in July to N97.1 billion last month.