Foreign Portfolio Investments (FPIs) on the Nigerian Exchange Limited (NGX) have surged significantly, reaching a record high of ₦744.34 billion in the first ten months of 2024. This marks the highest level of foreign portfolio transactions since 2018, driven largely by naira depreciation and reforms in Nigeria’s foreign exchange market.
Key Highlights
- Increased Inflows and Outflows: FPI inflows rose by 180.9% to ₦344.3 billion in 2024, while outflows grew by 136.9% to ₦400 billion from ₦168.8 billion during the same period.
- Year-on-Year Growth: This represents a 155.5% increase compared to ₦291.38 billion recorded in the same period in 2023.
- Market Trends: A steady upward trend in transaction volumes has been observed over the past three years, with ₦287.2 billion recorded in 2021 and ₦321.04 billion in 2022.
Domestic Investors Dominate Market Activity
Despite the sharp rise in FPIs, domestic investors remain dominant in the market, accounting for 82% of transactions. Domestic investments reached ₦3.726 trillion in the first ten months of 2024, a significant increase from ₦2.642 trillion recorded during the same period in 2023.
CBN Reforms Driving Growth
Analysts attribute the rise in FPIs to major reforms implemented by the Central Bank of Nigeria (CBN), including the floatation of the naira exchange rate and aggressive hikes in the Monetary Policy Rate (MPR).
Victor Chiazor, Head of Research and Investment at FSL Securities Limited, noted, “The CBN’s reforms aim to enhance transparency, compliance, and market stability, which have made the Nigerian equities market more attractive to foreign investors.”
Naira Depreciation and Market Appeal
David Adnori, Vice Executive Chairman at HighCap Securities Limited, emphasized the role of naira depreciation in making Nigerian stocks a bargain for foreign investors. “The weaker naira has significantly contributed to the increased activity by FPIs, signaling a gradual return of foreign investors to the market,” Adnori stated.
Outlook
The marked improvement in foreign investments underscores renewed confidence in Nigeria’s financial markets, supported by the ongoing economic and monetary reforms. While domestic investors maintain their lead, the increasing presence of FPIs reflects the growing appeal of Nigerian equities as international investors seek opportunities amidst currency devaluation.
As reforms continue, analysts expect sustained interest from foreign portfolio investors, bolstering Nigeria’s financial markets and contributing to overall economic recovery.
