By Nkiruka Nnorom
Foreign portfolio investors have returned to Nigeria’s stock market raising their stake by huge 338.72 percent in May 2023.
It is believed that they were betting on a positive economic direction from a new administration of President Bola Tinubu inaugurated at the end of the month.
Vanguard had reported that Foreign Portfolio Investments, FPI, in the market was almost going extinct as the investors held just about four percent of the market as at the end of April, 2023 following the myriads of challenges relating to foreign exchange and the difficulty in repatriating their funds.
They had reduced their investment by 7.83 percent to N8.47 billion in April from N9.19 billion in March 2023, indicating a greater intensity of their pull back. The FPIs had maintained steady decline over the past seven years.
But in May foreign investors raised their stake to N37.16 billion from N8.47 billion in April, representing a 338.72 percent increase, according to the Nigerian Exchange Limited (NGX) report on Domestic and Foreign Portfolio Investors’ Participation in Equity for May.
The new FPI position represents an 11.5 percent of the total equity transaction during the month and a 7.07 percentage point increase compared to their total transaction (4.43%) in April.
Upon his inauguration on May 29, 2023, President Tinubu signaled an economic direction with a highpoint in removal of fuel subsidy and subsequent announced a foreign exchange market reform which caused a wave of excitement across the private sector as well as the domestic and foreign investors.
Oscar Onyema, Group CEO, NGX Group, had expressed optimism over the possible impact of the policy changes on foreign portfolio investment inflow into the market.
Speaking in reaction to the policy changes, Onyema had said: “There is bound to be more investment flows in Nigeria. All these are the right noises for money. Money goes to the least resistant places where it can get the best risk adjustment returns without unnecessary hassles because there is competition across the globe.
“On what we have seen in the last eight years, there has been an outflow of foreign portfolio investments predominantly and more than half of our markets are outside of America, but with these policy changes, you can begin to understand why we are very optimistic that these flows will come back and with it, attract additional flows.”
Meanwhile, further analysis of transactions during the month showed that total transactions rose to N322.92 billion in May as against N191.21 billion in the previous month, thus representing a 68.88 per cent increase.
Also, total domestic transactions increased by 56.37 per cent to N285.76 billion from N182.74 billion in April.
The report also revealed that domestic retail transactions increased by 19.29 per cent to N88.50 billion during the review period from N74.19 billion in April.
Similarly, the institutional composition of the domestic market increased significantly by 81.72 per cent to N197.26 billion in May 2023from N108.55 billion in April 2023.
Source: Vanguard