Foreign investors remain on the sidelines as the Nigerian economy suffers from a US currency scarcity. According to the Nigerian Exchange’s (NGX) Domestic and Foreign Portfolio Report, stock market participation has fallen by around 33%.
The research indicated that overall transactions on the local market settled at N3.56 trillion in 2023, up 53.9% year on year from N2.32 trillion in 2022, according to Cordros Capital Limited’s most recent analysis.
According to the investment firm review, overall transactions increased by 14.4% month on month to N343.90 billion in December, up from N300.67 billion the previous month.
Analysts underlined that the gain was mostly attributable to a 29.1% month-on-month rise in domestic transactions, which printed at N296.03 billion, representing 86.1% of total transaction value.
The registered increase in domestic transactions was primarily driven by institutional investors amid a marginal contraction from retail investors (-1.2% m/m). In the period, institutional investors deepened their footprint with a 49.7% uptick in transactions conducted in the market. On the other hand, retail investors’ trade slumped 1.2% in the month.
Meanwhile, foreign inflows remained weak in December 2023. Foreign transactions declined by 32.9% to N47.9 billion from N71.40 billion in November due to the effect of the lingering FX liquidity constraints. “We expect domestic investors to continue to dominate the domestic equities market over the short-to-medium term, even as higher fixed-income yields may constrain buying activities”.
Cordros Capital analysts believe foreign investors will continue to adopt a wait-and-see approach in the near term, the firm however envisages improved foreign participation over the medium term driven by expected FX inflows as guided by the authorities, CBN’s recent actions in clearing its FX backlogs, and firm direction of interest rates.
