Foreign investors withdrew N45.8bn from NGX in January – Report

Foreign investors withdrew N45.85bn from the Nigerian stock market in January 2025, an outflow that significantly overshadowed the N25.66bn recorded as foreign inflows within the same period.

The latest Nigerian Exchange Domestic and Foreign Portfolio Investment Report revealed that foreign outflows accounted for 64.12 per cent of total foreign transactions on the exchange, reinforcing concerns over declining foreign participation in the market despite the relative stability of the naira.

It showed that total foreign transactions increased by 7.13 per cent, rising from N66.75bn in December 2024 to N71.51bn in January 2025.

However, this increase was largely driven by investors liquidating their holdings, as evidenced by the much larger outflow compared to inflows.

This trend indicates that while some foreign investors may still engage with the Nigerian market, a greater proportion opt to exit, contributing to capital flight.

The withdrawal of foreign funds from the market came amid a 9.89 per cent decline in total equity transactions on the NGX, which fell from N673.66bn in December 2024 to N607.05bn in January 2025.

On a year-on-year basis, total transactions dropped by 6.83 per cent from N651.52bn recorded in January 2024.

This suggests that investor sentiment remained subdued as both foreign and domestic players exercised caution in response to prevailing economic conditions.

The report read, “On a monthly basis, Nigerian Exchange Limited polls trading figures from market operators on their Domestic and Foreign Portfolio Investment flows.

“As at 31 January 2025, total transactions at the nation’s bourse decreased by 9.89 per cent from N673.66bn (about $438.64m) in December3 2024 to N607.05bn (about $410.84m) in January 2025.

“The performance of the current month when compared to the performance in January 2024 (N651.52bn) revealed that total transactions decreased by 6.83 per cent. In January 2025, the total value of transactions executed by Domestic Investors outperformed transactions executed by Foreign Investors by circa 76 per cent.”

The report further disclosed that foreign investors’ share of total market transactions stood at 11.78 per cent, with domestic investors dominating with 88.22 per cent.

This represents a slight increase from 9.91 per cent foreign participation in December 2024 but remains far below historical averages when foreign investors played a more substantial role in market liquidity and depth.

The disparity between inflows and outflows further highlights the persistent reluctance of foreign investors to commit fresh funds to Nigerian equities.

A closer look at domestic transactions revealed a notable shift in investor behaviour. Institutional investors, who traditionally drive market stability, significantly reduced their participation, with transactions falling by 33.95 per cent from N406.04bn in December 2024 to N268.19bn in January 2025.

This decline contrasts sharply with the retail segment, which saw a 33.10 per cent increase, as retail transactions rose from N200.87bn to N267.35bn within the same period.

This shift suggests that while institutional investors remain cautious, retail investors are showing increased enthusiasm, possibly seeking bargain opportunities in a market where valuations may appear attractive.

Despite concerns over foreign outflows, the exchange rate showed signs of stability, with the naira appreciating from N1,535.81/$ in December 2024 to N1,478.22/$ in January 2025.

This stability, however, was not sufficient to reverse foreign investor sentiment, as broader macroeconomic challenges persist.

The NGX report also provided a broader historical context, showing that over an 18-year period, domestic transactions increased by 33.15 per cent from N3.556tn in 2007 to N4.735tn in 2024, while foreign transactions grew by 38.31 per cent, from N616bn to N852bn over the same period.

However, foreign participation has steadily declined in recent years, with foreign investors accounting for only 15 per cent of total transactions in 2024, while domestic investors controlled 85 per cent of the market.

There is a need for foreign investors to increase their stake in Nigerian equities and for more stable macroeconomic policies, improved market transparency, and strengthened investor confidence.

However, the Central Bank of Nigeria’s monetary tightening policies, designed to curb inflation and stabilise the naira, are gradually boosting renewed foreign interest in the equity market.