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The Nigerian stock market recorded a total domestic transaction value of N2.5tn for the first half of the year.
According to the latest report from the Nigerian Exchange Limited on Tuesday, the data highlights the increasing dominance of local investors over their foreign counterparts, emphasizing a shift in the dynamics of the Nigerian capital market.
The report shows that domestic transactions accounted for 80.68 per cent of the total market activity, while foreign transactions contributed just 19.32 per cent.
Although foreign participation slightly increased from the 8.62 per cent recorded in the previous year, local investors continue to lead the market. The cumulative N2.5tn recorded in domestic transactions this year represents a growth of about 27 per cent compared to N1.968tn during the same period last year.
A closer look at the monthly figures reveals variations in transaction volumes throughout the year. In January domestic transactions stood at N598.41bn, accounting for 91.85 per cent of the total market activity. February saw a dip, with domestic transactions falling to N292.07bn, making up 81.61 per cent.
Also, March recorded a recovery, as domestic transactions reached N444.28bn, representing 82.50 per cent of total transactions. In April, domestic transactions dropped to N225.40bn or 65.10 per cent of total market activity.
In the period under review, May’s domestic transactions slightly increased to N231.10bn, contributing 65.03 per cent. June recorded N272.36bn in domestic transactions, making up 76.82 per cent of market activity while July witnessed a surge, with domestic transactions rising to N434.09bn, a 59.38 per cent increase from the previous month.
The rise in July’s figures was driven by increased retail investor participation, which saw a 138.48 per cent growth from N114.02bn in June to N271.92bn in July. Institutional investor activity also grew, albeit more modestly, by 2.42 per cent, from N158.34bn in June to N162.17bn in July.
While domestic transactions saw growth, foreign transactions experienced a decline. Year-to-date, foreign transactions totaled to N598bn, reflecting reduced interest from foreign investors. From June to July, foreign transactions dropped by 30.02 per cent, decreasing from N82.19bn to N57.52bn, highlighting the influence of foreign investors in the Nigerian stock market.
Looking at the longer-term trends, between 2007 and 2023, domestic transactions decreased by 10.94 per cent, while foreign transactions fell by 33.28 per cent. This trend illustrates how local investors have progressively taken the lead in market activities, supported by government policies, economic factors, and waning foreign interest.
Speaking with The PUNCH, a financial analyst, Ariyo Olugbosun, highlighted the current economic environment’s unsuitability for foreign investors. According to him, “Foreign investors have been shying away from the economy because the current economy does not favour foreign investors. They are scared they will not get the value of their investment because it has been wiped out by inflation.”
Olugbosun also noted the growing interest of domestic investors in the market, emphasizing the influence of technology and sensitization.
“We have people playing in the market. The technology shift at the exchange has made many Nigerians open to diverse people, and there is now market sensitization. We have many more platforms. Nigerians are gradually waking up.”
He stressed the importance of maintaining a balanced market, warning against over-reliance on foreign investors.
“We do not want foreign people to dominate our market because it can also be dangerous and damage the economy. What I foresee in the future is that the Nigerian Exchange Limited should make their market more attractive, and I see that more people, especially the youths, will come to invest more,” he added.
In a separate interview with The PUNCH, another financial analyst, Olaid Baanu, noted the significant increase in domestic investor activity between June and July 2024, adding that “Between June and July 2024, the total transaction value on the Nigerian Exchange increased by N137.05bn
. This growth was significantly driven by domestic investors, who contributed 88.30 per cent of the total transactions in July, up from 76.82 per cent in June,” Baanu said.
He attributed the rise in domestic participation to recent public offers and rights issues in the banking sector, which have attracted more local investors.
“The surge in domestic investor participation can be attributed to the ongoing public offers and rights issues within the banking sector, which have attracted increased interest from local investors. This heightened domestic involvement is expected to persist throughout the duration of these public offers,” Baanu noted.
Regarding the continuous decline in foreign investor activity, Baanu explained that it was linked to reduced interest in key stocks traditionally favoured by foreign investors.
“The persistent decline in foreign investor participation can be attributed to the lack of positive sentiment surrounding key bellwether stocks, where foreign investors traditionally have significant positions. Notably, stocks such as Dangote Cement, SEPLAT, MTN, and others recorded lower trading volumes in July, contributing to the reduced activity from foreign investors,” he said.
In June, PUNCH reported that the Nigerian Exchange witnessed contrasting trends in its equity market activities, with domestic transactions plunging by 49.27 per cent to N225.40bn in April, according to the latest domestic and foreign portfolio investment report by NGX.
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