Nigeria records N136.7b foreign portfolio deficit in first half 2020 – For every naira invested, foreign portfolio investors took out N2 in the first half of this year as Nigeria continues to wriggle with disproportionately high outflow of foreign portfolio investments (FPIs) against declining inflow.
Regulatory report obtained at the weekend indicated that foreign portfolio outflows rose to N266.68 billion in first half of the year as against inflows of N129.95 billion, representing a net FPI deficit of N136.7 billion. The deficits of N136.7 billion in first half 2020 represented 31.1 per cent increase on N104.29 billion recorded for last year.
Total FPIs for the six-month period ended June 30, 2020 stood at N396.63 billion. Total FPIs during the first half of 2019 had stood at N472.78 billion with outflows and inflows at N257.81 billion and N214.97 billion.
The FPI report, coordinated by the Nigerian Stock Exchange (NSE), included transactions from nearly all custodians and capital market operators and it is widely regarded as a credible measure of 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.
Outflow includes sales transactions or liquidation of equity portfolio investments while inflow includes purchase transactions. While inflows and outflows indicate direction of portfolio transactions, total FPI measures the momentum and level of participation.
The latest report on FPIs, however, showed improvement in June 2020 after FPIs touched 29-month low in May 2020. FPIs rose to N56.34 billion in June 2020 as against N35.24 billion recorded in May 2020.
FPI inflows improved from N18.43 billion in May 2020 to N25.27 billion in June 2020 while outflows also increased from N16.81 billion in May 2020 to N31.07 billion in June 2020.
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The report also indicated 6.32 percentage points decline in the overall participation in the Nigerian capital market, accounting for 39.53 per cent of total transactions by first half 2020 as against 45.84 per cent in first half 2019.
Domestic investors accounted for 60.48 per cent or N606.93 billion in first half 2020 compared with 54.16 per cent or N614.73 billion recorded in first half 2019. Domestic institutional investors displaced retail investors, pooling N320.52 billion in first half 2020 as against N285.04 billion in first half 2019. Domestic retail investors accounted for N286.41 billion in first half 2020 as against N329.69 billion in first half 2019.
The first half performance further underlined the downtrend that had characterized FPI trend in recent period. The Nation had reported that nearly three-quarters of FPIs in the first quarter of 2020 were on the sell side, with FPI deficits at N121.33 billion. Nigeria’s FPIs deficits- the difference between inflows and outflows within a specified period, worsened from N26.61 billion in first quarter of 2019 to N121.33 billion in first quarter 2020.
The report indicated that 74.1 per cent of total FPI transactions were on the sell side in first quarter of 2020 as against 56 per cent outflows in first quarter 2019 while the proportion of inflows to total transactions reduced from 44 per cent in first quarter 2019 to 25.9 per cent in first quarter 2020.
The report showed that total FPI outflows rose to N186.6 billion as against inflows of N65.27 billion in first quarter of the year compared with total outflows of N124.24 billion and inflows of N97.63 billion in first quarter 2019. Total FPI transactions thus increased from N221.87 billion in first quarter 2019 to N251.87 billion in first quarter 2020.
Last year, total FPI inflows stood at N419.13 billion as against outflows of N523.42 billion, representing a net deficit of N104.3 billion. Nigeria’s FPI had slipped into negative with a net deficit of N66.2 billion in 2018 after a world-leading stock market rally left the country with a surplus of N336.94 billion in 2017. Total foreign inflows in 2018 stood at N576.45 billion compared with outflows of N642.65 billion. Foreign inflows had in 2017 outpaced outflows at N772.25 billion and N435.31 billion.
The 12-month report for the year ended December 31, 2019 had shown that FPI transactions declined by N276.45 billion from N1.22 trillion in 2018 to N942.55 billion last year. Both sell and buy sides declined but the sell momentum was stronger. Total inflow dropped by N157.32 billion from N576.45 billion in 2018 to N419.13 billion in 2019 while total outflow declined by N119.23 billion from N642.65 billion in 2018 to N523.42 billion in 2019.
Total FPI transactions for the 12-month period ended December 31, 2018 stood at N1.219 trillion as against N1.208 trillion recorded in 2017.