…total outflow exceeded inflow by N30bn
Foreign Portfolio investment in the Nigerian stock market suffered a significant setback in first quarter of 2021, as value dropped by 40.4 percent.
In the shares segment of the Nigerian stock market as at March 2021, total portfolio investment by foreigners stood at N150.23billion compared with N251.87billion recorded in the same period in 2020.
Total foreign outflow from Africa’s largest economy through the equities market in first quarter exceeded inflow by N30.01billion.
Figures obtained from the Nigerian Exchange Limited showed that Outflow stood at N90.12billion as against Inflow of N60.11billion.
But while foreign investment is nose-diving, domestic participation is rising.
Domestic investors have continued to increase their participation in the equities market in recent times.
In first quarter of 2021, domestic investors splashed N526.30 billion on the shares of different companies listed on the Nigerian Exchange, which represented about 40.4 percent increase year-on-year compared to N374.99billion invested in the market in first quarter of 2020.
Breakdown of participation of domestic investment showed that domestic institutional investors are more bullish in the market when compared to the participation of their retail counterparts.
The figures made available by the Nigerian Exchange showed that the former accounted for over 56 percent of total investment done by domestic investors in the review period.
Furthermore, the domestic institutional investors increased their stake in the equities market by about 46 percent from N203. 53 billion in first quarter of 2020 to N296.51billion in first quarter 2021.
On the other hand, domestic retail investors also increased their investment by 34 percent from N171.46billion in first quarter of 2020 to N229.79billion in the review period.
Meanwhile, total foreign and domestic portfolio investment in first quarter of 2021 stood at N676. 53 billion as against N626.87 billion in the first quarter of 2020, representing a decline of 7.92 percent.
Commenting, the Monetary Policy Committee at its last bi-monthly meeting held in March attributed the weak performance of the equities market in first quarter to portfolio switching from equities to fixed income securities.
Investors are seen to be embracing the fixed income securities because of improved yield at the long end of the curve. The Committee noted the weak performance in the equities market despite the recent increased patronage by domestic investors.
“However, the All-Share Index and Market Capitalisation continued to decline due to portfolio switching from equities to fixed income securities, reflecting the perception of improved yields at the long end of the yield curve,” Godwin Emefiele, Governor of the Central Bank of Nigeria and Chairman of MPC disclosed in a communiqué.
The MPC further noted that “All- Share Index decreased by 1.17 per cent to 39,799.89 points on February 26, 2021 from 40,270.72 on December 31, 2020. Similarly, Market Capitalization fell by 1.11 per cent to N20.82 trillion on February 26, 2021 from N21.06 trillion on December 31, 2020.
This was attributed largely to investor sell-off, which continued to cause price depreciation of large and medium capitalised stocks.
As at 31 March 2021, total transactions at the nation’s bourse increased by 5.99 percent from N215.58billion (about $525.21million) in February 2021 to N228. 49billion (about $560.55million) in March 2021.
The performance of the current month, when compared to the performance in March 2020 (N242.91billion), revealed that total transactions decreased by 5.94 percent.
In March 2021, the total value of transactions executed by domestic investors outperformed transactions executed by foreign investors by approximately 64 percent.
A further analysis of the total transactions executed between the current and prior month (February2021) revealed that total domestic transactions increased by 22.37 percent from N153.51billion in February to N187.85billion in March2021.
However, total foreign transactions decreased by 34.53 percent from N62.07billion (about $151.23million) to N40.64billion (about $99.70million) between February 2021 and March 2021.
Retail investors outperformed Institutional investors by 16 percent.
A comparison of domestic transactions in the current and prior month revealed that retail transactions increased by 101.77 percent from N53.80billion in February 2021 to about N108. 6billion in March 2021.
However, the institutional composition of the domestic market decreased by 20.47 percent from N99.71billion in February 2021to N79.30billion in March 2021.
The performance of the market over a period of fourteen years showed that domestic transactions decreased by 59.54 percent from about N3.6trillion in 2007 to about N1.4trillion in 2020 whilst foreign transactions increased by 18.45 percent from N616 billion to N729 billion over the same period.
Total domestic transactions accounted for about 74 percent of the total transactions carried out in 2020, whilst foreign transactions accounted for about 26 percent of the total transactions in the same period.