NGX records 30% reduction in foreign inflows

Foreign inflow to Nigeria’s equities market fell by 29.66 per cent in February 2025, dropping to N18.05bn from N25.66bn recorded in January.

This decline in foreign inflow, alongside a drop in foreign outflow, led to a steep 40.36 per cent fall in total foreign portfolio transactions on the Nigerian Exchange Limited, which declined from N71.51bn to N42.65bn within the month.

The decline signals a weakening interest from offshore investors in Nigeria’s capital market, likely driven by macroeconomic uncertainties and continued volatility in the foreign exchange market.

Foreign outflows also reduced sharply, falling by 46.33 per cent to N24.60bn in February from N45.85bn in January, suggesting fewer exits but also a cautious stance from investors in February.

Total transactions on the exchange dropped by 16.07 per cent month-on-month, from N607.05bn (about $410.84m) in January to N509.47bn (about $341.36m) in February.

Despite the month-on-month drop, trading volumes were stronger year-on-year, with February 2025 activity rising by 42.36 per cent when compared to the N357.88bn recorded in February 2024.

Domestic investors continued to dominate market activity, accounting for 91.63 per cent (N466.82bn) of total equity transactions in February, while foreign investors contributed only 8.37 per cent (N42.65bn).

This marks a rise in domestic dominance from the 88.22 per cent share recorded in January. Within the domestic segment, institutional investors maintained stronger participation than retail investors. Institutional transactions stood at N252.31bn in February, a 5.92 per cent decline from N268.19bn in January.

Retail investor activity dropped more sharply by 19.76 per cent, from N267.35bn to N214.51bn within the same period. Cumulatively, total domestic transactions for the year stood at N1.002tn as of the end of February, outperforming the N890.48bn recorded in the same period in 2024.

Meanwhile, foreign portfolio activity reached N114.16bn, slightly below the N118.92bn recorded in the first two months of 2024. Over the past 18 years, domestic participation in the market has grown by 33.15 per cent, rising from N3.56tn in 2007 to N4.73tn in 2024.

Foreign transactions also saw growth, up 38.31 per cent from N616bn to N852bn over the same period. Nonetheless, the domestic market continues to account for the lion’s share of activity, making up 85 per cent of total transactions in 2024.

The Chief Executive Officer of Cowry Treasurers Limited, Charles Sanni, earlier told our correspondent that foreign investors typically bring in funds in their currencies and that the naira’s volatility had created uncertainties.

“Inflation created a blurry future for them. The expectation was that Nigeria would make money, but because of the volatility of the naira, it wasn’t stable, so they had to decide whether to continue investing. The NGX performance was fine, but it was eroded by foreign losses,” Sanni noted.

He expressed optimism about potential improvements in the coming months. However, he highlighted concerns over high domestic interest rates and their impact on corporate margins.

“If domestic interest rates remain high, the cost of funds for companies will rise, and their margins will thin out over time. Our credit system is not robust enough, and interest rates are already too high,” he stated.

Sanni warned that the situation reflects a lack of confidence in the economy, which could eventually lead to investor fatigue. “The government needs to manage inflation, stabilise the naira at around N1,200 per dollar, and ensure no crisis in Rivers State. There should also be more transparency in financial reporting,” he advised.