The total value of domestic transactions on the Nigerian Exchange Limited (NGX) in the first nine months of 2024 reached N3.27trn, dwarfing the N696.88bn recorded from foreign transactions over the same period.
This disparity highlights a growing trend of foreign investor reticence, attributed largely to Nigeria’s volatile economic climate.
This data was disclosed in the NGX’s September 2024 domestic and foreign portfolio investment report, as reviewed by THE WHISTLER.
The report revealed a staggering N2.57trn gap between domestic and foreign transactions, representing a 369.38 per cent increase in domestic activity relative to foreign participation.
The sharp imbalance highlights a crisis of confidence among foreign portfolio investors, who traditionally shy away from markets perceived as unstable.
Nigeria’s economic environment, marked by exchange rate volatility, inflationary pressures, and policy unpredictability, has exacerbated foreign investor skepticism. Many are reducing their exposure to mitigate risks, leading to a significant downturn in foreign participation on the bourse.
In September 2024, total transactions on the NGX rose by 29.90 per cent, climbing from N379.52bn (approximately $237.70m) in August to N493.01bn (about $307.84m).
When compared to September 2023’s N295.80bn, this represented a substantial 66.67 per cent increase. Despite this overall growth, foreign transactions accounted for only a fraction of the activity, as domestic investors continued to dominate.
Within the domestic segment, retail investors played a significant role. Retail transactions surged by 59.42 per cent, from N180.72bn in August to N288.10bn in September 2024.
Institutional transactions also grew, albeit at a slower rate, increasing by 15.69 per cent to N163.50bn in the same period.
Overall, domestic transactions in September significantly outperformed foreign transactions, contributing N451.60bn to the total—an 84 per cent advantage over the N41.41bn (about $25.86m) executed by foreign investors. Foreign activity, by contrast, declined by 27.95 per cent month-over-month, further reflecting their reduced confidence.
A broader analysis of the market’s performance over the past 17 years paints a concerning picture of declining foreign interest. Between 2007 and 2023, foreign transactions fell by 33.28 per cent, from N616bn to N411bn, while domestic transactions declined by a smaller 10.94 per cent, from N3.556trn to N3.167trn.
By 2023, domestic transactions accounted for 89 per cent of total market activity, compared to just 11 per cent for foreign transactions.
The widening gap between domestic and foreign transactions signals a critical need for reforms to stabilize Nigeria’s economic environment. Analysts warn that unless measures are taken to restore investor confidence, such as ensuring macroeconomic stability, clear fiscal policies, and a transparent regulatory framework, the country risks further alienating foreign investors, potentially limiting access to much-needed capital inflows.
While domestic investors have stepped up to fill the void, experts caution that over-reliance on local participation may leave the market vulnerable to internal economic shocks, necessitating a more balanced mix of domestic and foreign investments.