For the first time in 12 months, Nigeria has recorded positive foreign investment flow as foreign portfolio investors (FPIs) appeared to be showing renewed interests in Nigerian securities, implying that more foreign portfolio investments came into the country than outflows.
The FPIs report indicated a positive net foreign portfolio investment of about 20.5 per cent. The report also showed 10.6 per cent increase in total foreign portfolio transactions with FPIs outpacing domestic transactions at the Nigerian equities market for the second consecutive month.
The FPIs report, coordinated by the Nigerian Stock Exchange (NSE), included transactions from nearly all custodians and capital market operators and it is widely regarded as a credible measure of foreign portfolio investment (FPI) trend. The report uses 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 outflow includes sales transactions or liquidation of equity portfolio investments through the stock market while inflow includes purchase transactions on the NSE. Segmental analysis delineates the proportion of foreign to local participation, institutional to retail investors as well as the momentum of activities among others.
Foreign portfolio inflows 23.04 per cent from N28.98 billion in July 2019 to N34.92 billion in August 2019 while foreign portfolio outflow improved from N29.40 billion to N28.98 billion during the same period, representing a 20.5 per cent or N5.94 billion net FPIs in August compared with a deficit of N1.02 billion or 3.6 per cent in July. The last positive FPI flow was in August 2018. Total foreign transactions thus increased from N57.78 billion in July to N63.90 billion in August.
The report showed that while Nigerian domestic investors- both retail and institutional, tended to sell more shares than buy during the period, foreign investors stepped up buy orders and slowed down on sell orders.
Managing Director, APT Securities & Funds Limited Kasimu Garba Kurfi said most foreign investors understand and play better in the Nigerian investment market noting that clearer macroeconomic direction, upbeat crude oil pricing and reduced political risks usually influence foreign investments.
He, however, added that sell pressure on domestic investors might not be unconcerned with demand to raise funds to meet financing needs in preparation for resumption of schools. With a trading cycle of four days, most investors find their shares handy in the event of immediate cash requirement.
Chief Dealer, Globalview Capital Limited, Mr. Aruna Kebira, noted that stability and sustainability could influence foreign portfolio direction.
Chief Executive Officer, Sofunix Investment and Communications, Mr. Sola Oni, said strong fundamentals and undervaluation of Nigerian equities have made them attractive to investors noting that clearer economic and political directions have further reduced Nigerian macro risks and made Nigerian securities more attractive.
FPIs had outpaced Nigerian domestic investments in the equities market in 2018, after two-year domination by Nigerian domestic investors. However, FPIs had for most months tended towards outflows. Further analysis showed that for the past 12 years, foreign portfolio investors and Nigerian domestic investors had split the domination of transactions at the Nigerian market equally.
A year-to-date cumulative assessment also showed that total foreign transactions had reduced from N906.86 billion in first eight months of 2018 to N594.46 billion in first eight months of this year. FPI trend meanwhile was in line with the reduction in total transactions in the Nigerian equities market, which dropped from N1.88 trillion in eight-month period ended August 2018 to N1.32 billion in 2019. Nigerian domestic transactions had also reduced from N728.51 billion by August, last year to N970.31 billion last month. (The Nation)
