Nigeria’s stock market has suffered a big blow, as foreign investors reportedly withdrew over N435.41bn, ahead of the 2019 polls.
The latest data from the Nigerian Stock Exchange, shows that a total of N435.41bn was withdrawn from Nigeria’s stock market from January to July this year by foreign investors, compared to an outflow of N236.32bn in the same period in 2017.
Punch reported that though the market capitalisation rose from N13.617tn at the start of the year as a result of greater impetus from the recovery in global oil prices, increased domestic reserves, greater foreign exchange market stability and declining inflation, however the total value of equities listed on the NSE has taken a beating, closing at N11.88tn on Friday, as against a peak of N16.154tn on January 19.
“Once there is any cause to fear, portfolio investors sell out their shares and they come back when the environment is better; all of these create a lot of volatility in the market and may be one of the reasons why we do not have a lot of initial public offerings in the country,” the Associate Director, Capital Markets, PwC Nigeria, Alice Tomdio, told Punch’s correspondent.
According to Tomdio, even though the current ratio of foreign investors to domestic investors is still quite healthy as foreign portfolio investors participate primarily in the secondary markets, however more focus should be placed on encouraging the participation of domestic investors in the capital market.
It was further gathered that between 2011 and 2015, foreign transactions consistently outperformed domestic transactions; however, domestic transactions marginally outperformed foreign transactions in 2016 and 2017, accounting for 52 per cent of the total transaction value last year. Domestic transactions, according to the NSE, were largely driven by the 55.48 per cent increase in the retail domestic participation, which recorded N29.12bn in June and N65.42bn in July.
Over an 11-year period, domestic transactions decreased by 62.46 per cent from N3.556tn in 2007 to N1.335tn in 2017, meaning more foreign investors were dominating the market.