Uncertainty in Nigeria’s political space, coupled with high interest rates in the fixed-income market, is increasingly weighing on foreign participation in the equities market, with domestic transactions making up nearly 90 per cent of the total market transactions in the first seven months of the year.

The trend was reflected in the latest trading data, which showed that foreign investors accounted for only N1.29 trillion or 10.79 per cent of transactions on the Nigerian Exchange Group (NGX) between January and July 2026, despite a sharp increase in overall market activities.

As of 31 July 2026, year-to-date domestic transactions amounted to approximately N10.6 trillion, representing 89.2 per cent of total market transactions, while foreign transactions amounted to approximately N1.3 trillion or 10.8 per cent.

Total transactions on the NGX rose to N11.98 trillion in the first seven months, almost doubling the N6.01 trillion recorded in the corresponding period of 2025.

However, the growth was driven mainly by domestic investors, whose increasing participation has continued to reduce the relative influence of foreign investors in the market.

The strong domestic performance was supported by both institutional and retail investors. Institutional transactions increased by 145 per cent to N6.7 trillion while retail transactions doubled to N3.4 trillion during the period.

In addition, foreign inflows fell to N513.3 billion, while outflows increased to N779.4 billion, resulting in net foreign outflows of N266.07 billion.

This compares with net foreign outflows of N61.8 billion recorded in the corresponding period of 2025.

Analysts said the development reflected the cautious approach of foreign portfolio investors towards Nigerian equities, particularly as the country moves closer to another election cycle.

According to analysts, foreign investors typically become more cautious during the second half of an election cycle because of uncertainty over government policies, economic direction and possible changes in the investment environment.

They noted that foreign portfolio outflows from the equities market tend to increase in the second half of the year and may continue until investors have greater clarity about political and economic outlook.

The concerns are being compounded by the relatively high returns in the fixed-income market. With yields on Open Market Operation (OMO) bills at about 21 to 22 per cent, Treasury bills offering between 18 and 22 per cent and bonds yielding about 16 to 17 per cent, investors have increasingly found fixed-income instruments more attractive than taking additional risks in equities.

The expected increase in government spending ahead of the 2027 elections is also raising concerns about inflation and liquidity conditions.

The combination of political uncertainty, inflation concerns and high interest rates has encouraged some investors to rotate funds away from equities and into fixed-income instruments where they can earn relatively high and more predictable returns.

For foreign portfolio investors, the decision is particularly important because they have to consider not only the return on Nigerian assets but also currency, political and market risks.

Any weakness in the naira or uncertainty over the policy direction could reduce the attractiveness of equity investments, even when share prices are performing strongly.

The development has occurred despite the strong performance of the Nigerian equities market in 2026, with the NGX All-Share Index recording over 56 per cent gains and domestic investors taking a larger role in driving market activity.