Foreign portfolio investors increased the value of their buy orders for Nigerian equities by 61.4 per cent at the onset of this quarter, halting a sell-off that had seen more outflows than inflows all through the first quarter of this year.
For the first time this year, equities recorded positive foreign portfolio transactions as inflows from foreign portfolio investors (FPIs) increased from N25.89 billion in March to N41.78 billion in April.
The latest report on foreign portfolio investments (FPIs), released by the Nigerian Stock Exchange (NSE), showed that foreign portfolio inflows outpaced outflows by N6.64 billion in April, the first positive closing this year.
Foreign inflows stood at N41.78 billion as against outflows of N35.14 billion, indicating 37.1 per cent increase in total foreign transactions from N56.09 billion in March 2019 to N76.92 billion in April 2019. With more activities by foreign investors, who dominate transactions at the market, total transactions at the market consequently increased from N110.11 billion in March to N148.9 billion in April. Foreign investors accounted for 51.66 per cent of total transactions in April as against 48.34 per cent by domestic investors, sustaining a familiar trend of foreign dominance.
The FPI report, coordinated by the NSE, aggregates transactions from major custodians and capital market operators and it is widely regarded as a credible measure of the FPI trend. The report uses two key indicators-inflow and outflow, to gauge foreign investors’ mood and participation in the stock market as a barometer for the economy.
Foreign portfolio outflow includes sales transactions or liquidation of equity portfolio investments through the stock market while inflow includes purchase transactions on the NSE. Segmental analysis delineates the proportion of foreign to local participation, institutional to retail investors as well as the momentum of activities among others.
The country had suffered a net deficit of N26.6 billion in foreign portfolio transactions in the first quarter of this year amidst fears of political and macro-economic uncertainties. It recorded a negative balance of N26.6 billion in inflow and outflow transactions by foreign portfolio investors in first quarter 2019 compared with a positive balance of N30.88 billion recorded in comparable period of 2018.
The report also showed that foreign portfolio transactions dropped by N159.95 billion in first quarter 2019, representing a decrease of 41.89 per cent from the turnover in first quarter 2018. Total foreign portfolio transactions dropped from N381.82 billion in first quarter 2018 to N221.87 billion in first quarter 2019.
Foreign outflows surpassed inflows in 2019 with the sellers accounting for N124.24 billion as against N97.63 billion by the buyers. In first quarter 2018, foreign inflows had outpaced outflows with N206.35 billion and N175.47 billion respectively.
However, foreign investors sustained their dominance of activities at the country’s investment market during the three-month period, continuing the trend that started in 2018. A full-year analysis had shown foreign portfolio investors overtook local investors as the dominant bloc at the equities market last year, ending a two-year dominance of domestic investors in the stock market. Foreign portfolio investors traded about N1.22 trillion last year, a marginal percentage point increase on about N1.21 trillion traded in 2017.
However, transactions tended towards outflows than inflows, reversing the positive net foreign portfolio investments of N336.94 billion recorded in 2017 with a negative net foreign portfolio deficit of N66.2 billion in 2018.
Total FPI transactions for the 12-month period ended December 31, 2018 stood at N1.219 trillion as against N1.208 trillion recorded in 2017. Total transactions at the equities market had declined from N2.543 trillion in 2017 to N2.404 trillion last year. With these, foreign investors accounted for 50.87 per cent of total transactions at the equities market in 2018 compared with 47.49 per cent in 2017.
Domestic investors reduced their transactions to N1.185 trillion in 2018 as against N1.335 trillion in 2017, thereby accounting for 49.13 per cent of total transactions in the equities market in 2018 compared with 52.51 per cent in 2017.
While total transactions at the equities market declined last year FPIs showed sustained growth at N1.219 trillion in 2018, building on the 133 per cent growth that saw total FPI transactions rising to N1.208 trillion in 2017. Foreign investors had accounted for the largest transactions at the Nigerian stock market between 2011 and 2015, but were overtaken by domestic investors in 2016, who sustained their marginal lead in 2017.
Foreign transactions, which stood at N1.54 trillion in 2014, had declined considerably to N518 billion in 2016, before making a remarkable recovery to N1.208 trillion in 2017. Conversely, domestic investors, which had traded a high of N3.55 trillion in 2007, had shown considerable slowdown over the past 12 years, dropping by 66.67 per cent to N1.185 trillion in 2018.
However, the report showed net FPI deficit of N66.2 billion in 2018 as against surplus of N336.94 billion in 2017. Total foreign inflows in 2018 stood at N576.45 billion compared with outflows of N642.65 billion. Foreign inflows had in 2017 outpaced outflows at N772.25 billion and N435.31 billion respectively.