By Nkiruka Nnorom

Amidst decrease in domestic investors’ participation at the Nigerian Stock Exchange, (NSE) institutional investors have continued to dominate activity in the domestic space in the capital market compared to contribution by their retail counterpart. Recent figure released by the NSE on percentage of contribution by domestic institutional and retail investors for the month of December, 2015 showed significant decline in the total contribution by retail investors.

The monthly data pooled by the Exchange indicate that out of N880.56 billion contributed by domestic investors from January to December 2015to total market value, institutional investors accounted for N497.86 billion, while the remaining N382.70 billion was contributed by retail investors. On a year-to-year basis, domestic retail investors’ composition of the market fell by 40 per cent from N60.08 billion in January to N39.08 billion in December, 2015. On the other hand, institutional investors’ composition rose to N40.18 billion in December from N30.53 billion in January of the same year.

Also, the institutional composition of the domestic market which was about 47.17 per cent in November increased to 67.86 per cent at the end of December, while the retail composition decreased from 52.83 per cent to 32.14 per cent in the same period. According to operators in the market, the continuous dominance of institutional signal weak appetite for risk and lack of confidence in the market on the part of retail investors.

According to Johnson Chukwu, MD/CEO, Cowry Asset Management Ltd, lack of confidence by retail investors is fallout of negative returns recorded in the market in 2015.

In his words, “The dominance of institutional investors in the Nigerian equities market could be attributed to several factors, most important of which is the lack of confidence in the market occasioned by the negative returns suffered by investors in 2015 and since the beginning of the current year.

The market reported a negative return of 17.35 per cent in 2015 and within the first month of 2016, has already recorded a net loss of over 17 per cent. “Such losses do not engender confidence in investors, particularly retail investors who may not have the competence to select exceptional stocks that can outperform the market unlike the institutional investors.”

H listed other factors to include the current economic environment with its negative outlook, the relatively weak results being released by quoted companies since the second quarter of last year and the absence of credits to retail investors due to the stringent conditions imposed on banks by the Central Bank of Nigeria (CBN) from lending for speculative purposes.