The foreign holding in Nigerian stocks fell to $12 million in the second quarter of 2022, its lowest level since the Bureau of Statistics began reporting the data.
That’s according to second-quarter capital import data released by the National Bureau of Statistics during the week.
The total capital import into the country reached 1.53 billion dollars, against 875 million dollars in the same period last year. The total capital import into the country in the first quarter of the year was $1.573 billion, with foreign investment in the country continuing to increase as the global economy opens up.
Drastic fall of the FPI
Nigeria has seen a decline in capital imports since 2020 following the rollback of the central bank’s open market operations policy which offered higher interest rates in exchange for dollars from foreign investors .
- Capital inflows also worsened following the global Covid-19 shutdowns which triggered large capital outflows from emerging markets.
- But while other sectors have improved, albeit gradually, foreign portfolio investment in equities has deteriorated as investors shun the Nigerian stock market.
- In the first quarter of this year, the figure fell to $31.8 million from just $206 million for all of 2021.
- In fact, total REIT inflows into the country since 2020 stand at $1 billion, compared to $1.9 billion recorded in 3rd quarter of 2017 only.
- The data also aligns with the Nigerian Stock Exchange report which shows that only N64 billion was captured as foreign investment inflow into the stock exchange.
What does that mean
Foreign investor apathy for Nigerian stocks confirms that trading on the country’s flagship exchange is largely domestic.
The news continues after this announcement
- In the past, foreign investors have driven investment inflows into the country, with their money directly correlated to the rise or fall of the All-Share Index.
- However, equities have performed relatively well over the past three years and domestic investors have dominated equity investment participation.
- The All-Share index rose 50% and 6% in 2020 and 2021 respectively and 16.67% this year.
- Although this suggests that Nigerian equities have performed well in the absence or limited participation of foreign investors, the decline in foreign investors’ dollars has had negative connotations for the economy, as evidenced by the depreciation of the exchange rate. .
- An increase in dollars from foreign investors provides reliable liquidity for the foreign exchange market which in turn strengthens the exchange rate