Q1 2023: Foreign Investors’ Participation in Stock Market Drop to N53.71bn

Kayode Tokede
Amid political tension, high inflationary pressure and scarcity of foreign exchange, foreign investors’ inflow in stock market of the Nigerian Exchange Limited (NGX) dropped to N53.71billion in the first quarter of (Q1) 2023 from N128.91 billion reported in Q1 2022, a report by the NGX has revealed.

The report titled, “Domestic & Foreign Portfolio Participation in Equity Trading,” disclosed that foreign investors’ outflow decreased to N35.59 billion in Q11 2023 when compared to N73.58 billion in Q1 2022 as foreign inflow closed Q1 2023 at N18.12 billion from N55.33 billion in Q1 2022.

The report revealed that the stock market in the Q1 2023 witnessed slow exposure of domestic and foreign investors as N530.23billion transactions were carried as against N692.20billion in Q1 2022.
Domestic investors still dominate the stock market, controlling 89.87 per cent transactions, while foreign investors stood at 10.13per cent.

While responding to factors contributing to foreign investors existing the domestic market, the Director-General, the Securities and Exchange Commission (SEC), Mr. Lamido Yuguda at the first capital market committee (CMC) said, “No matter how attractive the domestic capital market is, a foreign investor will always factor in the ability to transfer their domestic earnings into foreign exchange so that they can repatriate this foreign exchange to their countries.
“Now at the moment we all know that we are having some challenges with the foreign exchange situation in Nigeria. That is international investors who are invested, you know, reporting some delays in assessing foreign exchange for the repatriation of their dividends or their capital.

“So because of this, you are seeing a reduced proportion of foreign investors in the Nigerian Capital Market relative to what this Market has been used to. That is a situation that is not permanent. We expect the foreign exchange situation in this country to substantially improve.”

“There are a lot of economic developments in the country today that actually are laying the foundation for a much more vibrant foreign exchange in the country. We do use a lot of our foreign exchange to import refined petroleum products. We know at the moment that the Dangote refinery in Lekki once it comes on stream, it will have the capacity of 650,000 barrels per day of refined petroleum products, lubricants, and the rest.

“So that means that a lot of the importation that is happening now should actually be sourced from this source and the amount of foreign exchange you are now wasting on importing refined petrol should substantially moderate if this huge refinery comes on board. It is actually very close to completion, so this is really a good thing. Secondly, in terms of the other aspects, Nigerian economy really has a good potential to generate foreign exchange from a lot of non-oil sources. So once this is realized, you will see a much higher generation of foreign exchange in Nigeria.

“If you have a higher generation of foreign exchange from non-oil sources and reduced utilization of foreign exchange to import the refined petrol, you’ll find that these two, should give you a much better situation where you can now use, the greater availability for exchange to meet the needs of investors who are interested in really taking advantage of the economic opportunities existing in our country.

“The solutions are there, but right now these solutions are actually in various stages of development. By the time they all come to full development, you will see that this situation should improve considerably, ”he explained.