Foreign investors trade N1.22tr on equities: Foreign portfolio investors traded about N1.22 trillion on Nigerian equities last year, a marginal percentage point increase on about N1.21 trillion traded by foreign investors the previous year.
A full-year Foreign Portfolio Investment (FPI) report obtained at the weekend from the Nigerian Stock Exchange (NSE) indicated that foreign portfolio investors overtook Nigerian investors as the dominant bloc at the equities market last year, ending a two-year dominance of domestic investors in the market.
However, transactions tended towards outflows than inflows, reversing the positive net foreign portfolio investments of N336.94 billion recorded in 2017 with a negative net foreign portfolio deficit of N66.2 billion in 2018.
The FPI report, coordinated by the NSE, polls transactions from major custodians and capital market operators; it is widely regarded as a credible measure of the FPI trend. The report uses two key indicators-inflow and outflow, to gauge foreign investors’ mood and participation in the stock market as a barometer for the economy. Foreign portfolio outflow includes sales transactions or liquidation of equity portfolio investments through the stock market while inflow includes purchase transactions on the NSE. Segmental analysis delineates the proportion of foreign to local participation, institutional to retail investors as well as the momentum of activities, among others.
Total FPI transactions for the 12-month period ended December 31, 2018 stood at N1.219 trillion as against N1.208 trillion recorded in the previous year. Total transactions at the equities market had declined from N2.543 trillion in 2017 to N2.404 trillion last year. With these, foreign investors accounted for 50.87 per cent of total transactions at the market last year compared with 47.49 per cent in 2017.
Domestic investors reduced their transactions to N1.185 trillion in 2018 as against N1.335 trillion in 2017, thereby accounting for 49.13 per cent of total transactions in the equities market in 2018 compared with 52.51 per cent in 2017.
While total transactions at the equities market declined last year, FPIs showed sustained growth at N1.219 trillion during the period under review, building on the 133 per cent growth that saw total FPI transactions rising to N1.208 trillion in 2017. Foreign investors had accounted for the largest transactions at the NSE between 2011 and 2015 but were overtaken by domestic investors in 2016, who sustained their marginal lead in 2017.
Foreign transactions, which stood at N1.54 trillion in 2014, had declined considerably to N518 billion in 2016, before making a remarkable recovery to N1.208 trillion in 2017. Conversely, domestic investors, which had traded a high of N3.55 trillion in 2007, had shown considerable slowdown over the past 12 years, dropping by 66.67 per cent to N1.185 trillion in 2018.
However, the report showed net FPI deficit of N66.2 billion last year as against surplus of N336.94 billion the previous year. Total foreign inflows stood at N576.45 billion compared with outflows of N642.65 billion last year. Foreign inflows had in 2017 outpaced outflows at N772.25 billion and N435.31 billion.
Further analysis showed that institutional domestic investors continued to outpace domestic retail investors, although retail investors have shown sustained growth in recent years. Domestic institutional investors accounted for N660.67 billion last year as against N937.54 billion the previous year while domestic retail investors increased their trades from N397.80 billion in 2017 to N524.63 billion last year.
The FPI report is coming on the heels of a United Nations Conference on Trade and Development’s (UNCTAD’s) report showing that its counterpart, foreign direct investment (FDI) dipped to $2.2 billion last year as against $3.5 billion the previous year.
In the Global Investment Trends Monitor for 2018, UNCTAD noted that while FDIs into Africa rose by six per cent, Nigeria, the continent’s second largest economy, witnessed a slowdown. Africa’s FDIs rose from $38 billion in 2017 to $40 billion last year. However, global FDIs declined by 19 per cent last year to about $1.2 trillion as against $1.47 trillion the previous year, the third consecutive decline.
Most analysts have attributed the slowdown in FPIs and overall performance of the equities market to heightened political risk, macroeconomic risks and increased yields in the less risky advanced economies.
Nigerian Stock Exchange (NSE) Chief Executive Officer Mr. Oscar Onyema said the bearish sentiments at the market were due to political risks, oil price volatility and rising global yields.
According to him, the market has been proven to have a strong connection with the international crude oil trend, a trend that was compounded by early onset of political risks as the country prepares for the February-March 2019 general elections.
As the country inches closer to the general elections, there had been increased political activities with campaigns, major political realignments by the two major political parties.The 2019 Presidential Election pits President Muhammadu Buhari of the ruling All Progressives Congress (APC) against former Vice President Atiku Abubakar of the opposition Peoples Democratic Party (PDP).