Foreign investors have increased their participation in Nigerian equities market by 60 per cent. This brings their level of holdings to over N430 billion in the first half of the year, according to the Nigerian Stock Exchange (NSE).
An update on foreign portfolio transactions in the Nigerian equities showed that foreign investors were investing more in Nigerian equities than they are taking out. While Nigerian domestic investors remain the larger bloc of investors, foreign portfolio investments (FPIs) at the stock market have significantly increased in the past three months.
The FPI report by the NSE, showed positive net foreign inflow in the first half of the year, compared with the negative net foreign investment position in the same period last year. The six-month FPI report for the period ended June 30, 2017, obtained at the weekend indicated that total foreign transactions rose to N430.23 billion in the first half of the year compared with N269.22 billion traded in first half of last year.
The FPI report used two key indicators-inflow and outflow, to gauge foreign investors’ mood and participation in the stock market as a barometer for the economy. Foreign portfolio investment outflow includes sales transactions or liquidation of equity portfolio investments through the stock market while inflow includes purchase transactions on the NSE.The NSE report is regarded as a credible gauge of foreign portfolio investments in Nigeria as it coordinates data from nearly all active investment bankers and stockbrokers.
Total foreign inflow rose to N215.97 billion in first half 2017 as against N121.29 billion recorded in corresponding period of 2016. While outflow also increased from N147.92 billion in first half last year to N214.26 billion in first half of theis year, it represented a modest positive net FPI position of N1.71 billion in first half 2017 as against a deficit of N26.63 billion in period last year.
The six-month report indicated that while inflow grew by 78.1 per cent over the comparable period, outflow only rose by 44.85 per cent. Foreign investors accounted for 46 per cent of total transaction value at the Exchange in first half of last year compared with 43 per cent in first half of last year.
Total transactions in first half of the year stood at N935.26 billion compared with N624.41 billion in first half 2016. Nigerian domestic investors had accounted for N505.03 billion in first half 2017 as against N355.19 points in comparable period last year.
Year-on-year, the report showed that foreign transactions have since 2011 consistently outperformed domestic transactions. However, domestic transactions marginally outperformed foreign transactions in 2016, accounting for 55 per cent of the total transaction volume in 2016. Also, foreign transactions have further declined by 66.34 per cent from N1. 54 billion in 2014 to N518 billion in 2016, representing about 45 per cent of total transactions last year.
Over the 10-year period between 2007 and 2016, domestic transactions have significantly decreased by 85.43 per cent from N3.56 billion in 2007 to N634 billion in 2016.
Month-on-month analysis indicated that total transactions at the equities market increased by 7.1 per cent from N205.61 billion recorded in May 2017 to N220.27 billion in June 2017. Domestic investors outperformed foreign investors by 7.82 per cent. Total domestic transactions increased by 7.53 per cent from N110.42 billion recorded in May 2017 to N118.74 billion in June 2017 while foreign transactions also increased by 6.66 per cent from N95.19 billion last May to N101.53 billion last June.
Monthly foreign inflows outpaced outflows. However, foreign inflows decreased by 10.95 per cent from N73.15 billion in May 2017 to N65.93 billion in June 2017 while foreign outflows increased by 38.09 per cent from N22.04 billion last May to N35.60 billion the following month.