Foreign portfolio investment (FPI) into the Nigerian stock market experienced a significant surge of 167.8 percent year-on-year, reaching N118.92 billion in February 2024 from N44.52 billion in the corresponding period in 2023.
This increase was propelled by improved liquidity in the foreign exchange (FX) market, following reforms implemented by the Central Bank of Nigeria (CBN).
According to the Domestic and Foreign Portfolio Investment report for February 2024 released by the Nigerian Exchange Limited (NGX), FPI accounted for 11.78 percent of the total equities transaction, amounting to N1.009 trillion during the period, marking a 0.3 percentage point increase.
Month-on-month (MoM), foreign investors’ stake rose by 23.9 percent to N65.81 billion from N53.11 billion recorded in January 2024. Additionally, their contribution to the total equities transaction increased to 18.39 percent from 8.15 percent between January and February 2024.
Further analysis reveals that year-to-date (YtD), FPI inflow stood at N40.71 billion, representing 37.9 percent of the total foreign investors’ commitment, while outflow amounted to N78.21 billion, constituting 62.1 percent of the foreign portfolio investment.
Investment analysts attribute the surge in FPI to the stability witnessed in the foreign exchange market. David Adonri, Vice Chairman of Highcap Securities, projected a resurgence of foreign investment inflow into the stock market, especially if the CBN continues to sustain remittance of trapped funds to foreign investors.
Adonri stated, “Foreign investors’ confidence was seriously eroded by their trapped funds in Nigeria. Since this administration has made it a cardinal objective to clear the outstanding remittances, there is a silver lining for FPIs that can encourage their return.”
Similarly, Oluwaseun Dosumu, Head of Research at Parthian Securities, emphasized the role of foreign exchange dynamics in attracting foreign investors. He said, “The resurgence of foreign investors in the Nigerian market is contingent upon the policies and dynamics of the foreign exchange market in 2024. With the anticipation of an enhancement in supply during the year, there is a potential for a modest upturn in foreign portfolio investment in the Nigerian Exchange.”
