Foreign stock transactions dip by 53% as domestic trading hits N476b

Prolonged foreign exchange (forex) illiquidity, uncertainty and other macroeconomic challenges are taking their toll on the capital market as total foreign transactions on the Nigerian Exchange Limited ( NGX) dipped by 53.16 per cent last month.

The Domestic and Foreign Portfolio Investment Report released by the NGX showed that foreign transactions fell by 53.16 per cent from N19.62 billion (about $42.51million) to N9.19 billion (about $19.94 million) between February 2023 and March 2023, while domestic transactions slipped by 19.06 per cent from N169.29 billion to N137.03 billion in the same period.

According to the report, total domestic transactions accounted for about 84 per cent of the total transactions carried out in 2022, while foreign transactions accounted for about 16 per cent.

Also, the transaction data for 2023 revealed that total domestic transactions hit N476.52 billion, while total foreign transactions stood at N53.71 billion. As at March 31, 2023, total transactions at the nation’s bourse decreased by 22.6 per cent, from N188.91billion (about $409.72 million) on February 5, 2023, to N146.22 billion (about $317.09 million) on March 6, 2023.

The performance of the month reviewed when compared to March 2022 (N185.26 billion) revealed that total transactions decreased by 21.07 per cent. In March 2023, the total value of transactions executed by domestic investors outperformed transactions executed by foreign investors by 88 per cent.

Further analysis of the FPI report indicated that institutional investors outperformed retail investors by 22 per cent.

A comparison of domestic transactions in the current and prior month (February 2023) revealed that retail transactions increased by 51.85 per cent, from N34.79 billion in February to N52.83 billion in March 2023.

However, the institutional composition of the domestic market decreased significantly, by 37.4 per cent from N134.5 billion in February 2023 to N84.2 billion in March 2023.

Over 16 years, domestic transactions decreased by 45.3 per cent from N3.556 trillion in 2007 to N1.945 trillion in 2022, whil foreign transactions also decreased by 38.47 per cent from N616 billion to N379 billion over the same period.

Indeed, foreign participation in the local bourse has so far moderated in recent years due to issues around forex liquidity and monetary policy while positive domestic investor sentiment, may, however be attributed to strong earnings and dividend payouts announced by companies in the wake of earnings season.

Reacting to the development, the chief executive officer of Wyoming Capital and Partners, Tajudeen Olayinka, said Nigeria is in dire need of foreign investment to enable the country navigate through an adjustment programme that must necessarily come into place, post Buhari’s administration.

According to him, the country needs a good mix of local and foreign investors’ participation to become more vibrant. “The economy is yet to embark on a full transition programme, even though, government is in transition. And so, few foreign investors that still manage to participate in our market would need to exercise caution in their dealings, so that they are not caught in the web.”

Vice President of Highcap Securities Limited, David Adonri, said foreign investors are participating less in Nigeria because of excruciating forex scarcity.
According to him, many of the foreigners have trapped funds they are unable to remit. Adonri pointed out that the political and economic risks are worsening, adding that these can frighten foreign investors.