Domestic Players Dominate Transactions at Equities Marker by 86.23% as Foreign Participation Wilts

Kayode Tokede

Domestic investors have continued to dominate transactions in the equities segment of the Nigerian Exchange Limited (NGX), contributing about 86.23 per cent in first quarter of 2024, as against 13.77 per cent contributed by foreign investors. 

In Q1 2023, domestic investors contributed about 89.87 per cent, while foreign investors contributed 10.13 per cent in Q1 2023.

The NGX in its “domestic & foreign portfolio participation in equity trading” data revealed that that over a 16 years period, domestic transactions decreased by 10.94 per cent from N3.556 trillion in 2007 to N3.167 trillion in 2023, while foreign transactions also decreased by 33.28 per cent from N616 billion to N411 billion over the same period.

“Total domestic transactions accounted for about 89 per cent of the total transactions carried out in 2023, whilst foreign transactions accounted for about 11 per cent of the total transactions in the same period,” the report added. 

According to the Exchange data, both the foreign and domestic investors traded N1.55 trillion worth of stocks in Q1 2024, a growth of 192 per cent from N530.23 billion in Q1 2023.

The breakdown of the N1.55 trillion transactions revealed that domestic investors traded N1.33 trillion, compared to N213.18 billion total transactions by foreign investors.  

The report disclosed that foreign investors inflow increased to N933.37 billion in Q1 2024 from N18.12 billion in Q1 2023, while outflow grew by 237per cent to N119.81 billion in Q1 2024 from N35.59 billion reported in Q1 2023.

Furthermore, the breakdown of the N1.33 trillion showed that domestic retail investors transacted N670.89 billion in stock market in Q1 2024 from N123.28 billion in Q1 2023, while domestic institutional transactions in Q1 2024 reached N663.87 billion from N353.24 billion reported in Q1 2023.

As the domestic investors continued to drive the stock market, its market capitalisation and NGX ASI appreciated by N18 trillion and 39.84 per cent, respectively in Q1 2024, amid push by local investors.

THISDAY had reported that the Nigerian stock market Q1 2024, offered investors the second-best return in Africa on the back of the economic reforms embarked upon by the President Bola Tinubu administration.

The Nigerian stock market, in the period under consideration, according to available data, came ahead of other exchanges, excluding the Zimbabwe Stock Exchange (ZSE) All Share Index, which had about 314.19 per cent YtD growth.

The gain in the NGX ASI is on the backdrop of rising insecurity, double-digit inflation rate, hike in Monetary Policy Rate (MPR) among other macroeconomic challenges.

Specifically, the NGX ASI, an indicator used to measure the performance of listed firms on the exchange, opened the year at 74,773.77 basis points, implying an increase of 39.84 per cent, to close March 28, 2024 at 104,562.06 basis points.

In Q1, 2023, the overall market performance measured by NGX ASI rose by 5.11 per cent to close at 54,232.34 basis points.

Analysts have noted that foreign exchange backlog, among other factors responsible for foreign investors staying clear from Nigerian stock market.

The CBN in March 2024 announced that it has successfully cleared all valid foreign exchange backlogs, effectively eliminating a legacy burden.

This accomplishment fulfils a commitment made by CBN Governor, Mr Olayemi Cardoso, who vowed to address an inherited backlog of $7billion in claims.

Cardoso during an investor virtual call facilitated by the Nigerian Exchange Group (NGX Group), stated that, “Last year, the total amount of inflow to the best of my knowledge from FPI was down to $3 billion. Already this year alone from the little we have done, we have attracted $2billion.

“My point is this, with the right policies, approach, and open and transparent mechanism flow will start coming. We have done as much as possible to move the market to a more transparent and open market such that those who play in it can get the confidence that arguably lost over a period of time.”

The Group Managing Director/Chief Executive Officer, NGX Group, Mr. Temi Popoola had expressed that investors play a critical role in capital formation, “as they also help, among other things, improve price discovery and efficiency in the markets. Foreign investors help to provide market liquidity and help strengthen foreign exchange liquidity.”