The Nigerian Exchange Limited (NGX) has recorded a notable surge in domestic transactions during the first eight months of 2024, amounting to N2.82trn.
This significant rise contrasts sharply with the N655.47bn recorded in foreign transactions over the same period.
The information which was disclosed in the NGX’s August 2024 Domestic and Foreign Portfolio Investment report, as obtained by NewsNGR highlighted the growing dominance of local investors in the Nigerian capital market.
An analysis of the report shows that domestic transactions outpaced foreign investor activity by a staggering N2.16trn, representing a 330.23 per cent increase.
This marked disparity can be attributed to the declining interest of foreign investors, driven largely by the prevailing economic volatility.
Heightened uncertainty in the Nigerian economy, exacerbated by fluctuating exchange rates, inflationary pressures, and broader macroeconomic instability, has led to diminished confidence among foreign portfolio investors.
As a result, many have scaled back their exposure, adopting a more cautious approach towards investing in the Nigerian market.
Historically, foreign portfolio investors tend to withdraw from markets experiencing instability, and Nigeria’s current economic challenges have reinforced this trend.
Foreign participation has been particularly subdued, reflecting concerns about the unpredictability of returns and risks of currency devaluation, both of which have contributed to the preference for safer, more stable investment environments.
By the end of August 2024, total transactions at the Nigerian bourse saw a significant month-on-month decline of 22.80 per cent, dropping from N491.61bn (approximately $305.02bn) in July 2024 to N379.52 billion (about $237.70m) in August 2024.
Nevertheless, compared to August 2023, when transactions totalled N262.56bn, the overall performance in August 2024 represented a 44.55 per cent year-on-year increase.
This positive annual growth highlights the resilience of the domestic investment community, despite the ongoing economic turbulence.
In August 2024, domestic investors continued to dominate the market, accounting for approximately 70 per cent of the total transactions, further highlighting the diminished participation of foreign investors.
The ongoing economic uncertainty, combined with capital control measures and other regulatory challenges, continue to weigh heavily on foreign sentiment, leaving domestic investors to drive activity in the nation’s capital market.
The trends observed suggest that unless there is a significant improvement in the economic environment and investor confidence, foreign participation in Nigeria’s capital market may remain constrained, while domestic investors continue to fill the gap.
A further analysis of the total transactions executed between the current and prior month (July 2024) revealed that total domestic transactions decreased by 25.81 per cent from N434.09bn in July 2024 to N322.05bn in August 2024.
Similarly, total foreign transactions decreased marginally by 0.09 per cent from N57.52bn (about $35.69m) to N57.47bn (about $35.99m) between July 2024 and August 2024.
According to the report, retail Investors outperformed Institutional Investors by 12 per cent.
A comparison of domestic transactions in the current month and prior month (July 2024) revealed that retail transactions decreased by 33.54 per cent from N271.92bn in July 2024 to N180.72bn in August 2024.
Also, the institutional composition of the domestic market decreased by 12.85 per cent from N162.17bn in July 2024 to N141.33bn in August 2024.
Highlights of the performance of the market over the last decade showed that over seventeen years, domestic transactions decreased by 10.94 per cent from N3.556trn in 2007 to N3.167trn in 2023; whilst foreign transactions also decreased by 33.28 per cent from N616bn to N411bn over the same period.
Total domestic transactions accounted for about 89 per cent of the total transactions carried out in 2023, whilst foreign transactions accounted for about 11 per cent of the total transactions in the same period.