Kayode Tokede
As the Central Bank of Nigeria (CBN) sustains its foreign exchange reforms, foreign investors' transactions in the Nigerian Exchange Limited (NGX) reached N696.88 billion in the first nine months of 2024, the highest since 2018.
The figure which was contained in the NGX's latest report for September 2024, represents about a 170.1 per cent increase from the N258.02 billion total transactions recorded by foreign investors in nine months of 2023.
These transactions include both inflow and outflow of investments.
Of the N696.88billion, foreign investments' inflow stood at N310.99 billion in the nine months of 2024, up from N108.93 billion in the first nine months of 2023, while outflow moved from N149.09 billion in the nine months of 2023 to N385.89 billion in nine months of 2024.
THISDAY's analysis revealed that in the corresponding period in 2022, foreign investor transactions stood at N321.04 billion, and in 2021, it was at N287.20 billion.
In 2020, the Exchange, in its "Domestic & Foreign Portfolio Participation in Equity Trading" report disclosed that foreign investors' transactions stood at N510.25 billion, and in 2019, the report disclosed N688.91 billion total foreign investors transactions.
In addition, the report revealed N991.19 billion total transactions in nine months of 2018.
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 led the Naira to depreciate to N1,601.03 against the dollar in nine months of 2024 from N768.76 in the nine months of 2023.
Commenting on foreign investors' cutdown on domestic investors' participation in the stock market, the Vice President, Highcap Securities Limited, Mr. David Adnori in a chat with THISDAY, attributed the increase to the federal government's moves to resolve foreign exchange backlogs, stressing that the move increased investors' confidence and sustained rally in the stock market.
"The increase in yield on debt instruments attracted foreign investors to the debt market. The combination of all these factors increased Foreign Portfolio Investment (FPI) into the capital market.
"In summary, Nigeria's high-yield environment, recent regulatory reforms, a large and growing market, and supportive international signals make it an attractive destination for foreign investors seeking growth and diversification," he added.
The Governor of the CBN, Mr Yemi Cardoso, had said the apex bank was addressing the long-outstanding balance from the $7 billion foreign exchange transaction backlog it inherited from the previous administration.
This backlog, accumulated over recent years, had created a substantial hurdle for economic stability and eroded investor confidence in Nigeria's FX market.
According to recent statements, the CBN had settled a substantial portion of these obligations, particularly those verified as legitimate through third-party audits involving firms like Deloitte Consulting. The remaining unverified claims were undergoing scrutiny to ensure authenticity.
In addressing the foreign exchange backlog, Cardoso had emphasised that restoring investor confidence was central to Nigeria's economic strategy, aiming to stabilise the Naira and encourage foreign investments.
However, the Exchange report, revealed that both foreign and domestic investors have transacted about N3.97 trillion in nine months of 2024, representing about 46.3per cent increase from N2.71 trillion reported in nine months of 2023.
According to the report, out of the N3.97 trillion total transactions in nine months of 2024, foreign investors' contribution stood at 17.56 per cent, while domestic investors comprising retail and institutional rose to 82.44 per cent.
Domestic investors transacted an estimated N3.27 trillion worth of transactions in the stock market in nine months of 2024, about a 33.3 per cent increase from N2.45 trillion transacted in nine months of 2023, the report revealed.
Of the N3.27 trillion, domestic retail investors transacted N1.74trillion, an increase of 105per cent from N849.32 billion reported in nine months of 2023, while domestic institutional total transaction dropped to N1.53 trillion in nine months of 2024 as against N1.61 trillion reported by NGX in nine months of 2023.
The latest report for September 2024, showed that total transactions at the nation's bourse increased significantly by 29.90 per cent from N379.52 billion (about $237.70 million) in August 2024 to N493.01 billion (about $307.84 million) on September 6, 2024.
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"The performance of the current month when compared to the performance in September 2023 (N295.80 billion) revealed that total transactions increased by 66.67 per cent. In September 2024, the total value of transactions executed by Domestic Investors outperformed transactions executed by Foreign Investors by circa 84per cent.
"A further analysis of the total transactions executed between the current and prior month (August 2024) revealed that total domestic transactions increased by 40.23 per cent from N322.05 billion in August 2024 to N451.60 billion in September 2024. However, total foreign transactions decreased by 27.9 5per cent from N57.47 billion (about $35.99 million) to N41.41 billion (about $25.86 million) between August 2024 and September 2024."
Performance of the market over 17 years revealed that domestic transactions decreased by 10.94 per cent from N3.556 trillion in 2007 to N3.167 trillion in 2023; whilst foreign transactions also decreased by 33.28 per cent from N616 billion to N411 billion over the same period.
"Total domestic transactions accounted for about 89per cent of the total transactions carried out in 2023, whilst foreign transactions accounted for about 11 per cent of the total transactions in the same period. The transaction data for 2024 shows that total domestic transactions are circa N3.271 trillion, whilst total foreign transactions are circa N696.88 billion," the report added.
