Foreign Portfolio Investments, or FPIs, on the Nigerian Exchange Limited (NGX) set a new high of N744.34 billion in the ten months ending October 31, 2024 (10M’24), the largest since 2018. The analysis shows that inflows climbed 180.9 percent to N344.3 billion in 2024, while outflows increased 136.9 percent to N400 billion from N168.8 billion.
The development has been linked to the Central Bank of Nigeria’s (CBN) several reforms in the foreign exchange market, most notably the floating of the exchange rate. Details of the inflows received by Vanguard on foreign transactions in the NGX’s latest report for October 2024 show that this marks a 155.5% rise from the N291.38 billion registered in the first ten months of 2023, 10M23.
A three-year trend reveals that transaction volume has steadily increased since 2021, when it was N287.2 billion, to N321.04 billion in 2022. However, domestic investors maintained market dominance, outperforming the FPI by 82%. Domestic investors transacted N3726.63 trillion in the 10th month of 24 compared to N264.2 trillion in the 10th month of 23.
Victor Chiazor, Head of Research and Investment at FSL Securities Limited, commented on the performance of FPIs during the review period, saying: “The CBN recently implemented significant reforms in the foreign exchange market, aimed at enhancing transparency, compliance, and market stability.” These reforms were part of the CBN’s larger effort to create a more equitable and stable foreign exchange market while also supporting economic growth through better monetary policies.
“In addition to these measures, the CBN launched aggressive Monetary Policy Rate (MPR) hikes to combat inflation and stabilise the naira, which was supported by the International Monetary Fund (IMF). “These policies have led to the increase by foreign investors in the equities market at the expense of Naira that keptdepreciating in value against the Dollar” .
David Adnori, Analyst/Vice Executive Chairman at HighCap Securities Limited, also commented: “We have seen an increase in the return of foreign portfolio investors, and FPI turnover has grown significantly in the last few months.”
This can be linked to the weakened naira, which makes Nigerian stocks a bargain for foreign investors. This significant increase in foreign investment highlights the gradual return of international portfolio investors to Nigeria, which we believe is largely due to the CBN’s continuing reforms”.
