Nigeria’s equity market witnesses disparity between foreign portfolio inflows, outflows

Latest foreign portfolio investment data published by the research department of the NGX shows that Nigeria’s equity market witnessed a significant disparity between foreign portfolio inflows and outflows in the first quarter of 2024.

According to the data, the first quarter of 2024 recorded a total foreign inflow of N93.37 billion against a foreign outflow of N119.81 billion.

The data also revealed that the total net outflow for the quarter was N26.44 billion, suggesting that foreign investors are pulling out more funds than they are bringing into the Nigerian equity market.

In January 2024, foreign portfolio investments showed a significant disparity between inflows and outflows, with foreign outflows more than doubling the inflows, standing at N37.33 billion against an inflow of N15.78 billion.

In February 2024, foreign inflows were recorded at N24.93 billion, while outflows amounted to N40.88 billion. In contrast, February 2023 saw an inflow of N3.68 billion and an outflow of N15.94 billion.

March 2024 saw the highest inflow within the quarter at N52.66 billion, with outflows remaining substantial at N41.60 billion.

Compared to March 2023, which recorded an inflow of N4.60 billion and an outflow of N4.59 billion, there was a remarkable increase of 1044.8 per cent in inflows and 806.3 per cent in outflows.  This was the only month in the quarter with a positive net inflow, which was at N11.06 billion.

According to some analysts, the rise in foreign portfolio outflows can put more pressure on the Nigerian naira, potentially leading to depreciation, as foreign investors convert their holdings to foreign currencies, increasing the demand for these currencies relative to the naira.

They also opined that increased foreign outflows can lead to a decline in stock prices as foreign investors sell off their holdings. This can result in reduced market capitalization and lower investment returns for local investors.

According to the analysts, while these reforms have been pivotal in reshaping the market dynamics and influencing investment decisions, the rise in outflows raises concerns about the investment climate in Nigeria.

Speaking at the end of the 294th meeting of the Monetary Policy Committee (MPC), the CBN governor, Yemi Cardoso, said that it is normal for investors to come and go.

He also said that the apex bank has met with foreign investors to understand what they seek in the market and make necessary reforms, such as ensuring more transparency.

Cardoso added that the clearing of the forex backlog was prioritised to strengthen investors’ confidence in the country. He reaffirmed that there is now a renewed and sustained confidence in the Nigerian market.