Surging Domestic Investments: Nigerian Stock Market Sees N2.5 Trillion in Local Transactions Amidst Foreign Withdrawal

The Nigerian stock market witnessed a significant shift in investor dynamics during the first half of the year, recording a total domestic transaction value of N2.5 trillion. According to the latest report from the Nigerian Exchange Limited (NGX) released on Tuesday, this development highlights the growing dominance of local investors over their foreign counterparts, marking a notable transformation in the Nigerian capital market.....KINDLY READ THE FULL STORY HERE▶

Rising Domestic Dominance

The report revealed that domestic transactions accounted for a staggering 80.68% of the total market activity, overshadowing the 19.32% contributed by foreign transactions. While foreign participation slightly increased from 8.62% in the previous year, local investors have continued to lead the market, driving significant growth in transaction volumes. The N2.5 trillion recorded in domestic transactions this year represents an impressive 27% increase compared to N1.968 trillion during the same period last year.

Monthly Variations in Market Activity

A closer examination of the monthly figures reveals fluctuations in domestic transaction volumes throughout the year. In January, domestic transactions stood at N598.41 billion, making up 91.85% of the total market activity. February saw a dip, with domestic transactions falling to N292.07 billion, accounting for 81.61%. March, however, witnessed a recovery as domestic transactions reached N444.28 billion, representing 82.50% of the market.

April experienced a decline in domestic transactions, dropping to N225.40 billion or 65.10% of total market activity. May saw a slight increase to N231.10 billion, contributing 65.03%. In June, domestic transactions rose to N272.36 billion, making up 76.82% of market activity. July marked a significant surge, with domestic transactions jumping to N434.09 billion, a 59.38% increase from the previous month.

Retail and Institutional Investor Trends

The July surge was largely driven by increased retail investor participation, which saw a remarkable 138.48% growth from N114.02 billion in June to N271.92 billion in July. Institutional investor activity also showed a modest increase of 2.42%, rising from N158.34 billion in June to N162.17 billion in July.

Declining Foreign Interest

While domestic transactions thrived, foreign investor activity continued to decline. Year-to-date, foreign transactions amounted to N598 billion, reflecting reduced interest from overseas investors. From June to July, foreign transactions dropped by 30.02%, decreasing from N82.19 billion to N57.52 billion, underscoring the waning influence of foreign investors in the Nigerian stock market.

Long-Term Trends and Expert Insights

Looking at long-term trends between 2007 and 2023, domestic transactions decreased by 10.94%, while foreign transactions fell by 33.28%. This shift illustrates how local investors have increasingly taken the lead in market activities, bolstered by government policies, economic factors, and diminishing foreign interest.

Financial analyst Ariyo Olugbosun, speaking with The PUNCH, highlighted the challenges facing foreign investors in the current economic environment. “Foreign investors have been shying away from the economy because the current conditions do not favor them. Inflation has eroded the value of their investments, leading to hesitancy,” Olugbosun explained. He also noted the growing interest of domestic investors, driven by technological advancements and increased market awareness.

Olugbosun warned against over-reliance on foreign investors, emphasizing the importance of a balanced market. “We do not want foreign dominance in our market as it can be detrimental. The Nigerian Exchange Limited should focus on making the market more attractive, particularly to younger investors,” he added.

In a separate interview, financial analyst Olaid Baanu pointed out the significant increase in domestic investor activity between June and July 2024. “The total transaction value on the Nigerian Exchange increased by N137.05 billion between June and July 2024, with domestic investors contributing 88.30% of the total transactions in July, up from 76.82% in June,” Baanu stated. He attributed this rise to recent public offers and rights issues in the banking sector, which have drawn increased interest from local investors.

Baanu also linked the decline in foreign investor activity to reduced interest in key stocks traditionally favored by foreign investors. “The persistent decline in foreign investor participation is tied to the lack of positive sentiment around key stocks like Dangote Cement, SEPLAT, and MTN, which saw lower trading volumes in July,” he noted.