FX Reforms: Foreign Investors’ Participation in Stock Market Up 107.5% to N852.03bn

Kayode Tokede

Following the Central Bank of Nigeria (CBN) reforms in the foreign exchange market, foreign investors’ transactions in the stock market of the Nigerian Exchange Limited (NGX) reached a total of N852.03 billion in 2024, making it the highest record since 2019.

This is about 107.5 per cent increase from N410.62 billion total transactions recorded by foreign investors in 2023.

According to the Domestic and Foreign Portfolio Participation in Equity Trading report by the NGX, both domestic and foreign investors’ transactions closed 2024 at N5.59 trillion, representing 56.1 per cent increase over the N3.58 trillion declared in 2023. 

The stock market in 2024 had appreciated by N20.99 trillion to N61.912 trillion from N40.918 trillion in 2023, attributable to new listings, aggressive buying interest in fundamental stocks, improving foreign investors participation, among other factors. 

Of the N5.59 trillion, domestic investors transaction stood at N4.73 trillion, an increase of 49 per cent from N3.17 trillion reported by the Exchange in 2023.  This means domestic investors in 2024 contributed 84.75 per cent out of the overall N5.59 trillion transactions, while foreign investors contributed 15.25 per cent in 2024 from 11.48 per cent declared in 2023. 

The N4.73 trillion growth by domestic investors reflects a robust contribution from retail investors, which stood at N2.31 trillion in 2024 from N1.12 trillion in 2023, while institutional investors’ activity increased from N2.05 trillion in 2023 to N2.43 trillion in 2024. 

For context, retail contribution accounted for 48.7 per cent of total domestic transactions—underscoring the growing role of individual investors, while institutional contributed 51.3 per cent on increasing exposure of Pension Fund Administrators (PFAs) to the stock market section of the Exchange. 

An investigation by THISDAY showed that foreign investors in 2022 and 2021 contributed 16.32 per cent and 22.88 per cent of the overall transactions, respectively. 

According to the NGX report, out of the N852.03 billion by foreign investors, inflow stood at N396.41billion in 2024 from N174.8 billion in 2023, while outflow moved from N235.82billion in 2023 to N455.62 billion in 2024.  

The CBN recently implemented significant reforms in the foreign exchange market aimed at enhancing transparency, compliance, and market stability.

These reforms are part of the CBN’s broader strategy to create a fairer, more stable FX market and support economic growth through better monetary policies.

In tandem with these reforms, the CBN has also implemented aggressive Monetary Policy Rate (MPR) hikes, with the goal of curbing inflation and stabilizing the naira, a move supported by the International Monetary Fund (IMF).

Analysts stated that the Nigerian stock market showed less volatility signs amid a new era of unpredictability, marked by tariff threats and rising global tensions, that may prompt emerging market investors to look for shelter in frontier markets that are relatively safe from US President Donald Trump’s trade policy shifts.

 Commenting on foreign investors participation in the stock market in 2024, the Managing Director Arthur Steven Asset Management Limited (ASAM), Mr. Olatunde Amolegbe stated that foreign capital inflows have steadily increased, from a low of four per cent in mid-2023 to an average of 16per cent as of November 2024.

He expressed that Nigeria’s relative market attractiveness, if supported by stable policies, could lead to increased foreign portfolio inflows (FPI).

“We projected 39per cent return on the All-Share Index (ASI) driven by ongoing bank recapitalization, fresh equity listings, and anticipated monetary policy easing by the CBN. The recapitalization process is expected to boost investor confidence, while new listings like the Dangote Refinery will enhance market liquidity,” he said.

On his part, Vice President, Highcap Securities Limited, Mr. David Adnori attributed the increase in foreign investors participation to federal government moves to resolved foreign exchange backlogs, stressing that the move increased investors’ confidence and it sustained rally in the stock market.

“The increase in yield on debt instruments attracted foreign investors to the debt market. The combination of all these factors increased FPI into the capital market. In summary, Nigeria’s high-yield environment, recent regulatory reforms, a large and growing market, and supportive international signals make it an attractive destination for foreign investors seeking growth and diversification,” he added.

The governor of the CBN, Mr Yemi Cardoso, had said the apex bank is addressing the long outstanding balance from the $7 billion foreign exchange transaction backlog it inherited from the previous administration.

This backlog, accumulated over recent years, created a substantial hurdle for economic stability and investor confidence in Nigeria’s FX market.

According to recent statements, the CBN has settled a substantial portion of these obligations, particularly those verified as legitimate through third-party audits involving firms like Deloitte Consulting. The remaining unverified claims are still undergoing scrutiny to ensure authenticity, aligning with the CBN’s approach to transparency and financial integrity.

In addressing the foreign exchange backlog, Cardoso emphasised that restoring investor confidence was central to Nigeria’s economic strategy, aiming to stabilize the Naira and encourage foreign investments.

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