May 31, 2021

Foreign portfolio investment in Nigeria’s equities slumps 50.7%

Foreign portfolio investment in Nigeria’s equities slumps 50.7%

By Nkiruka Nnorom

Foreign investors’ confidence in the Nigerian equities market has continued to wane as their participation in the market fell by a huge 50.74 percent to N20.02  billion at the end of April 2021 from N40.64 billion in the previous month.

The Foreign Portfolio Investors (FPIs) participation, according to the data on ‘Domestic and Foreign Portfolio Participation in Equity Trading’ for April 2021, represents a paltry 17.52 percent contribution to the total equity transaction, which stood at N159.93 billion during the period.

Investment analysts had said that foreign portfolio investment commitment in Nigeria would continue to see a downward trend given the exchange rate volatility and the uncertainty of repatriating their capital and earnings to their home country.

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They insisted that FPIs are not going to come to Nigeria knowing that foreign Exchange (FX) prices are managed and not market reflected. “It is very difficult to attract capital when you are dealing with low yields and high inflations and then you still try to control FX pricing. So, there is no way we would get the level of capital that the market needs,” Ali Khalpey, CEO, EFG Hermes Frontier, had said.

Further analysis of the FPI involvement in the market showed that the inflow saw a decline of 10.61 percent to N18.20 billion from N20.36 billion in March, 2021.

The outflow was also on a decline, but slowed down considerably by 50.58 percent to N9.82 billion from N20.28 billion.

The FPI commitment had fallen to N40.64 billion in March, 2021 from N62.07 billion in February indicating a 35.5 percent decline between February and March, though it rose by 30.62 percent between February and January this year.

Meanwhile, total transactions at the nation’s bourse decreased by 30.01 percent to N159.93 billion during the period under review from N228.49 billion in March 2021 but increased by 24.29 percent year-on-year (Y/Y) from N128.67 billion in April 2020.