In the first quarter of 2024, Nigeria’s Stock Market (NGX) experienced a remarkable surge in foreign portfolio inflows, totaling N93.37 billion, marking a staggering 415% increase compared to the same period in 2023.
This notable increase was unveiled in the Foreign Portfolio Investment data for Q1, as released by the research department of the NGX.
However, when assessed in dollar terms, the actual inflow amounted to $70.1 million for the quarter, contrasting with $39.2 million recorded in Q1 2023.
It’s worth noting that the NGX adopted an exchange rate of N1330/$1 in Q1 2024, in stark contrast to the N461.13/$1 rate utilized in Q1 2023.
Detailed Analysis:
Foreign portfolio investors injected $70.1 million into the market during Q1 2024, coupled with an outflow of $90.03 million, resulting in a net forex outflow of $19.87 million, a significant improvement from the net outflow of $37.8 million in the same period last year.
March emerged as the month with the highest foreign portfolio transactions, amounting to approximately $70 million, while February and January recorded transactions of $49.4 million and $39.9 million, respectively, totaling $160.2 million (equivalent to N213.8 billion).
Despite the robust performance in Q1 2024, the total FPI transactions fell short of the $116.4 million recorded in Q1 2023, significantly below the $309 million recorded in 2022. In 2019, prior to the COVID-19 pandemic and the current economic challenges, total FPI transactions reached as high as $724 million.
Insights and Trends from NGX:
Further scrutiny of the transactions executed between February and March 2022 revealed a 3.59% increase in total domestic transactions, amounting to N143.09 billion, while total foreign transactions decreased by 7.17%, totaling N42.17 billion.
Institutional investors outperformed retail investors by 16%, indicating a shift in market dynamics.
Long-Term Trends:
Over a fifteen-year span, domestic transactions experienced a significant decline of 58.80%, dropping from N3.556 trillion in 2007 to N1.465 trillion in 2021. Similarly, foreign transactions saw a decrease of 29.38%, declining from N616 billion to N435 billion over the same period.
In 2021, domestic transactions accounted for approximately 77% of the total, with foreign transactions making up the remaining 23%. In 2022, domestic transactions totaled around N563.29 billion, while foreign transactions amounted to approximately N129.01 billion.
Despite these challenges, foreign investor participation in the Nigerian equities market has averaged below 15% since 2022, influenced by various factors including Nigeria’s exchange rate situation, rising interest rates in the United States, and global capital flows shifting away from emerging markets.
NGX Performance Amid Foreign Apathy:
Despite the general apathy from foreign portfolio investors, the NGX has maintained its position as one of the best-performing stock exchanges in Q1 2024.
According to NGX data, the NGX All Share Index (ASI) has returned 38.9% year-to-date, significantly surpassing the 5.82% return recorded in the same period in 2023.
From 2021 to 2023, the ASI consistently posted robust year-to-date returns, with significant gains accruing to domestic investors who continue to dominate transaction flows.
