Nigerian Equities Market Attracts $19.2bn Investment in Five Years

Kayode Tokede

As foreign investors take a position in low-priced stocks, the Nigerian equities market attracted a total of $19.2 billion (N8.83 trillion) in Foreign Direct Investment between 2018 and 2022, a report by the National Bureau of Statistics (NBS).

The figure represents 31.2 per cent out of $61.46 billion total capital importation into the country in the period under review.

Analysis of the NBS numbers showed that the year 2022 recorded the highest decline in FDI, followed by 2021.

 Analysts attributed this to domestic economy challenges such as scarcity of foreign exchange, and political uncertainty, among others.

Further analysis showed that in 2022, the stock market attracted $469.42 million out of total     $5.33 billion capital inflow into the nation’s economy.

The reported $469.42 million inflow into the stock market is a decline of about 57.08 per cent when compared to $1.09 billion inflow into the stock market in 2021.

According to the NBS, FDI importation into the stock market stood at $1.85 billion in 2020, contributing about 19.1 per cent out of the $9.68 billion capital inflow into the nation’s economy.

In addition, capital inflow into the stock market stood at $5.33 billion and $10.43 billion in 2019 and 2018 respectively. 

However, analysts believe FPIs commitment in Nigeria is on downward trend, attributing it to foreign exchange volatility and the political situation in the country.

Commenting, the Chief Executive Officer, Wyoming Capital and Partners, Mr. Tajudeen Olayinka, noted that, “The Foreign Portfolio Investment in equity is declining because of the exchange rate management.

“A situation of multiple exchange rate regime cannot give room for proper allocation of resources in the economy. This is one of the macroeconomic factors that have made it difficult for Nigeria’s economy to adjust to full employment output and external balance over the years.

“This situation may improve in the coming years with an administration that has preference for private sector dominance.”

On his part, the Vice Chairman, Highcap securities Limited, Mr. David Adonri, noted that, “There is a foreign exchange rate risk attendant to foreign portfolio investment. Persistent depreciation of the local currency in recent past is capable of heightening exchange rate risk leading to loss on investments.

“Secondly, foreign portfolio investors’ confidence was eroded by their inability to remit proceeds of their investments. Finally, FPIs are sensitive to socio-political events. Few of the investors who have taken the risk arising for the political tension are investing in Fixed Income.”

Looking into 2023, a capital market analyst, Mr. Rotimi Fakeyejo said, “The political tension in Nigeria even with the conclusion of the general election is still not over and it continued to threaten the safety of their investments, hence their low confidence in the economy.

“If the new administration in 2023 are able to make the market attractive, we would begin to see foreign investors back to the market.” We have constantly seen reduction in foreign portfolio investments over the years and it is likely that the situation may change once the new administration gets things right in the Nigerian economic management system.”

He highlighted that issues such as exchange rate, capital importation and corporate governance among others continued to discourage foreign inflow.

“Until foreign investors see concrete policies and effort to correct some of these anomalies, domestic investors will continue to carry the market,” he added.

Meanwhile, further analysis showed that the banking sector attracted in $16.97billion in five years under review. 

The figure represents 27.6 per cent of the total capital importation into the country in the five years period. The analysis is, however, based on sectoral disintegration, implying that the amount cuts across both portfolio and direct investments.

Within the five years period leading to December 2022, about $2.08 billion came into the country via banking sector category as against $1.46 billion reported by NBS in 2021.

According to NBS, categorization of capital importation by banks shows that Citibank Nigeria Limited ranked top in fourth quarter of 2022 with $308.72 million or 29.10 per cent.

It was followed by Standard Chartered Bank Nigeria Limited, which attracted $232.45 million or 21.91 per cent and Rand Merchant Bank with $102.00 or 9.62 per cent.