Nigeria’s Economic Woes Drive Foreign Investors to Dump N455bn Worth of Stocks
Foreign investors withdrew N455.62bn from the Nigerian stock market in 2024, significantly outpacing total inflows and reinforcing concerns about investor confidence despite the Central Bank of Nigeria’s efforts to stabilise the naira.
Industry experts attributed this to the volatility of the naira, stressing that it created uncertainties and that inflation also caused a blurry future for foreign investors.
Data from the Nigerian Exchange Limited’s Domestic and Foreign Portfolio Investment Report showed that while foreign transactions for the year amounted to N852.03bn, outflows accounted for 53.47 per cent, as inflows stood at N396.41bn, further highlighting the exit of foreign investors from the Nigerian capital market.
The report revealed that foreign participation in the Nigerian stock market remained relatively low, accounting for 15.25 per cent of total transactions, while domestic investors dominated with N4.73tn, representing 84.75 per cent.
The imbalance in participation between domestic and foreign investors reflects a broader trend observed in recent years, with foreign players reducing their exposure to Nigerian equities amid economic uncertainties and capital control concerns.
Foreign outflows varied significantly throughout 2024, reflecting shifts in investor sentiment. In January, foreign investors withdrew N37.33bn, while inflows stood at N15.78bn, leading to a net outflow of N21.55bn.
The trend continued in February, with outflows rising to N40.88bn, and inflows increasing to N24.93bn, narrowing the net outflow to N15.95bn. In March, inflows surged to N52.66bn, outpacing outflows of N41.60bn, making it the first month in 2024 where foreign investment in the stock market exceeded exits.
By April, foreign investors accelerated their withdrawals, with outflows jumping to N78.25bn, while inflows stood at N42.58bn, leading to a net outflow of N35.67bn, the largest recorded in 2024.
In May, the outflows remained high at N69.41bn, while inflows increased to N54.87bn, resulting in a net outflow of N14.54bn.
In June, outflows declined to N43.94bn, while inflows fell to N38.25bn, leaving a net outflow of N5.69bn.
The second half of the year saw lower outflows in some months but did not result in sustained foreign confidence in the market. In July, foreign outflows dropped to N19.95bn, the lowest recorded in the year, while inflows also declined to N37.57bn, leading to a net inflow of N17.62bn.
In August, outflows increased slightly to N24.38bn, while inflows dropped to N33.09bn, resulting in another net inflow of N8.71bn. However, the trend reversed in September as outflows climbed back to N30.15bn, while inflows sharply declined to N11.26bn, leading to a net outflow of N18.89bn.
Foreign exits slowed in October, with outflows declining to N14.15bn, while inflows stood at N33.31bn, creating a net inflow of N19.16bn. The trend of net inflows continued in November, with foreign withdrawals rising slightly to N15.09bn, while inflows dropped to N25.85bn, resulting in a net inflow of N10.76bn.
However, December saw a return to high outflows, as foreign investors pulled out N40.49bn, while inflows were N26.26bn, leading to a net outflow of N14.23bn. Overall, total foreign outflows for 2024 reached N455.62bn, exceeding inflows of N396.41bn by N59.21bn.
Foreign withdrawals surpassed inflows in seven out of 12 months, reflecting unstable confidence among foreign investors. Despite the higher outflows, foreign participation in the market improved compared to 2023, when total foreign transactions stood at N410.62bn.
The 107.54 per cent increase in foreign activity suggests that while investors were engaged in the market, they primarily used opportunities to exit rather than reinvest in Nigerian equities.
The dominance of domestic investors continued in 2024, accounting for 84.75 per cent of total market transactions.
Domestic transactions reached N4.735tn, more than five times the total foreign transaction value. A breakdown of domestic participation showed that retail investors accounted for N2.306tn, representing 48.72 per cent of total domestic trades, while institutional investors led with N2.429tn, or 51.28 per cent.
Institutional investors played a critical role in market stability, with their participation increasing by 18.63 per cent year-on-year, while retail investor activity grew by 11.57 per cent.
The data also showed significant shifts in institutional involvement, particularly in December, when domestic institutional transactions surged by 97.09 per cent, from N206.02bn in November to N406.04bn in December, reflecting renewed confidence among large investors.
Retail transactions, in contrast, saw only a 2.81 per cent increase over the same period. The Nigerian stock market recorded total transactions of N5.587tn for 2024, representing a 56.2 per cent increase from N3.578tn in 2023.
This growth was largely driven by increased domestic activity, particularly from institutional investors. A month-on-month analysis showed that total transactions in December 2024 rose by 52.29 per cent, from N442.34bn in November to N673.66bn, due to a 51.20 per cent increase in domestic transactions from N401.40bn to N606.91bn and a 63.04 per cent increase in foreign transactions from N40.94bn to N66.75bn.
Compared to December 2023, transactions in December 2024 were up by 95.88 per cent, indicating a sharp rise in market activity.
The report read in part, “A further analysis of the total transactions executed between the current and prior month (November 2024) revealed that total domestic transactions increased by 51.20 per cent from N401.40bn in November 2024 to N606.91bn in December 2024.
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“Similarly, total foreign transactions increased by 63.04 per cent from N40.94bn (about $24.61m) to N66.75bn (about $43.47m) between November 2024 and December 2024.”
Despite persistent foreign outflows, the exchange rate showed relative stability, attributed to the CBN’s monetary policies. The naira strengthened from N1,663.39/$ in November 2024 to N1,535.81/$ in December 2024, marking a 7.67 per cent appreciation.
However, the improved exchange rate did not immediately translate into higher foreign investment, as investors remained cautious due to concerns over inflation, monetary policy adjustments, and capital repatriation.
Economic Confidential earlier reported that foreign investors withdrew N45.85bn from the Nigerian stock market in January 2025, an outflow that significantly overshadowed the N25.66bn recorded as foreign inflows within the same period.
The latest Nigerian Exchange Domestic and Foreign Portfolio Investment Report revealed that foreign outflows accounted for 64.12 per cent of total foreign transactions on the exchange, reinforcing concerns over declining foreign participation in the market despite the relative stability of the naira.
It showed that total foreign transactions increased by 7.13 per cent, rising from N66.75bn in December 2024 to N71.51bn in January 2025. However, this increase was largely driven by investors liquidating their holdings, as evidenced by the much larger outflow compared to inflows.
This trend indicates that while some foreign investors may still engage with the Nigerian market, a greater proportion opt to exit, contributing to capital flight.
The withdrawal of foreign funds from the market came amid a 9.89 per cent decline in total equity transactions on the NGX, which fell from N673.66bn in December 2024 to N607.05bn in January 2025.
On a year-on-year basis, total transactions dropped by 6.83 per cent from N651.52bn recorded in January 2024. This suggests that investor sentiment remained subdued as both foreign and domestic players exercised caution in response to prevailing economic conditions.
Experts have previously noted that sustained policy consistency, improved capital market regulation, and clear FX repatriation frameworks will be essential in attracting foreign investors back to Nigerian equities.
Experts React
When contacted, the Chief Executive Officer of Cowry Treasurers Limited, Charles Sanni, explained that foreign investors typically bring in funds in their currencies and that the naira’s volatility had created uncertainties.
“Inflation created a blurry future for them. The expectation was that Nigeria would make money, but because of the volatility of the naira, it wasn’t stable, so they had to decide whether to continue investing. The NGX performance was fine, but it was eroded by foreign losses,” Sanni noted.
He expressed optimism about potential improvements in the coming months. However, he highlighted concerns over high domestic interest rates and their impact on corporate margins.
“If domestic interest rates remain high, the cost of funds for companies will rise, and their margins will thin out over time. Our credit system is not robust enough, and interest rates are already too high,” he stated.
Sanni warned that the situation reflects a lack of confidence in the economy, which could eventually lead to investor fatigue. “The government needs to manage inflation, stabilize the naira at around N1,200 per dollar, and ensure no crisis in Rivers State. There should also be more transparency in financial reporting,” he advised.
Also commenting on the issue, the Managing Director of Highcap Securities, David Adonri, stated that Foreign investors in the Nigerian capital market remain cautious due to concerns over sovereign risk, profitability, and liquidity,
Adonri noted that while investors may not be completely exiting the market, some are repatriating profits or reducing their exposure to the debt market due to declining interest rates.
“Perhaps they are not satisfied with the country’s sovereign risk. However, they are not leaving but may just be adjusting their positions. There may also be the perception that equities are at their peak and due for harvesting,” he stated.
Despite these concerns, Adonri expressed optimism about improved foreign investor confidence, particularly following the Central Bank of Nigeria’s settlement of most trapped funds. He also highlighted key reforms that could attract more foreign participation.
“The Nigerian capital market is inundated with hedging futures to manage currency risks. There is no more capital control, so foreign investors can now enjoy free entry and free exit of capital. These are measures capable of boosting foreign investor confidence,” he added.
An economist and investment specialist, Vincent Nwani told The PUNCH that Foreign participation in the Nigerian stock market remained weak in the full year to December 2024, standing at 16 per cent an improvement from 10 per cent in 2023, yet still significantly low.
Nwani attributed the trend to a persistent lack of investor confidence and foreign exchange challenges. “When the multinationals left the country, it might have been one of the reasons why they left. Foreign investors cannot bring in their money that must have informed this decision,” he said.
While some may argue that Nigerian investors are filling the gap left by foreign investors, Nwani cautioned against viewing the situation solely from an emotional perspective.
“In the London Stock Exchange, domestic investors don’t even control up to 59 per cent. The stock market is international, and on the flip side, it shouldn’t be like this. The focus should be on ensuring a stable foreign exchange rate,” he added.
