Foreign Portfolio Investments, FPIs, on the Nigerian Exchange Limited (NGX) reached a new high with total value of transactions at N744.34 billion in the ten months ended October 31, 2024 (10M’24), the highest since 2018.
The breakdown shows that inflows increased by 180.9 percent to N344.3 billion in 2024 while outflow increased by 136.9 percent to N400 billion from N168.8 billion.
The development has been attributed to the various reforms executed by the Central Bank of Nigeria, CBN, in the foreign exchange market, principally, the floatation of the exchange rate.
Details of the inflows obtained by Vanguard on the foreign transactions in the NGX’s latest report for October 2024, indicates that this represents about a 155.5% increase from the N291.38 billion recorded in ten months of 2023, 10M’23.
A three year trend shows a steady rise in transaction volume since 2021 when the figure recorded N287.2 billion, and in 2022 it recorded N321.04 billion.
However, domestic investors sustained dominance in the market surpassing the FPI by 82%. Domestic investors recorded N3726.63 trillion transactions in the 10M’24 as against N264.2 trillion in 10M’23.
Commenting on the performance of FPIs in the period under review, Head of Research and Investment at FSL Securities Limited, Victor Chiazor, said: “The CBN recently implemented significant reforms in the foreign exchange market, aimed at enhancing transparency, compliance, and market stability. These reforms were 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 had also implemented aggressive Monetary Policy Rate (MPR) hikes, to curb inflation and stabilise the naira, a move supported by the International Monetary Fund (IMF).
“These policies have led to the increase by foreign investors in the equities market at the expense of Naira that kept depreciating in value against the Dollar”.
Commenting as well, David Adnori, Analyst/Vice Executive Chairman at HighCap Securities Limited, said: “We have seen increasing return of foreign portfolio investors and the turnover by FPIs has grown significantly in the last few months.
“This can be attributed to the weaker naira that makes Nigerian stocks a bargain for FPIs. This marked improvement in foreign investment underscores the gradual return of foreign portfolio investors to Nigeria, a development we believe is largely connected to the ongoing reforms by the CBN”.
