Foreign inflows on the Nigerian Exchange Limited (NGX) reportedly grew to N344.3 billion in the 12 months of 2024, marking a significant increase in foreign participation in the Nigerian capital market.
According to ‘Nigeria’s Capital Market (NCM) outlook report 2025: The Capital Market and the Quest for a $1 trillion economy’, from Proshare, the figure represents a 181% increase from N122.55 billion in 2023.
The report noted that this was driven by improved market sentiment, favorable policy shifts, and perceived investment opportunities.
Foreign outflows also rose significantly by 137%, from N168.83 billion in 2023 to N400 billion in 2024, reflecting profit-taking and concerns about macroeconomic uncertainties.
The report explained that liquidity in the Nigerian market has mainly been driven by FPI, a key component of capital importation.
According to the National Bureau of Statistics (NBS), FPI accounted for about 58% of total capital importation in H1 2024, reflecting a year-on-year growth of 360.28% to $3.48 billion. In contrast, FDI contributed only 2.5% to total capital importation, with a modest year-on-year growth of 11.5%.
This disparity, Proshare stated, highlights the persistent volatility of Nigeria’s foreign exchange market, exacerbated by the inherent instability of FPI and the insufficient inflow of FDI, which is generally more effective in stabilising the currency.
Domestic retail investors made up 51% of equities market participation as of October 2024, nearly equal to the 49% by institutional investors.
This balance, it said, demonstrates the inclusivity of the market, with domestic retail participation likely to grow in 2025, bolstered by sustained market rallies and the SEC’s promotional efforts.
Reacting to the report, market experts said that Nigeria’s reliance on FPI poses risks due to its short-term nature, reinforcing the need for strategies that encourage long-term FDI.
They added that enhanced market reforms and regulatory initiatives could strengthen domestic participation and ensure greater market stability amidst global economic uncertainties.
Meanwhile, the naira depreciated by 0.3% to N1,547.58/$1 at the Nigerian Foreign Exchange Market (NFEM) despite the intervention from the CBN who sold $300.90 million to authorised dealers within the week. As a result, the country’s FX reserves declined by $330.12 million w/w to $40.42 billion.
Culled from The Sun