October 28, 2024/CSL Research
According to the Nigerian Exchange Limited (NGX) report on domestic and foreign portfolio participation in equities for September 2024, the total transactions at the nation’s bourse increased m/m by 29.9% to N493.01bn in September from N379.52bn in August 2024. Thus, bringing the total transaction value in Q3 2024 to N1.36trn, a reasonable q/q growth of 29.2% from N1.06trn in Q2 2024. Looking at the transaction value breakdown, the domestic investors continue to dominate market activities with a participation rate of 88.3% vs 11.7% for foreign investors in Q3 2024.
Year-to-date (YTD), from January to September 2024, foreign investor participation (both inflows and outflows) increased significantly, rising by 170% to N696.88 billion, up from N258.02 billion during the same period in 2023. However, on a quarter-on-quarter (q/q) basis, Foreign Portfolio Investment (FPI) participation declined in Q3 2024, dropping by 52.2% to N156.4 billion, down from N327.3 billion in Q2 2024. While FPI inflows saw substantial growth year-on-year (y/y), climbing 185% to N310.99 billion from N108.93 billion in the same period in 2023, total inflows recorded in Q3 2024 decreased by 39.6% from N135.7 billion in Q2 2024. Additionally, on a month-on-month (m/m) basis, FPI inflows fell to N11.26 billion in September 2024, marking a 27.9% decline from N33.09 billion in August 2024, the lowest monthly figure for the year.
The decline in foreign portfolio investment (FPI) participation in Q3 2024 can be attributed to recent rate hikes by the Monetary Policy Committee (MPC), which continue to support the attractiveness of fixed-income yields. Additionally, volatility and illiquidity in the foreign exchange (FX) markets continue to deter FPI participation. Efforts by the Central Bank of Nigeria (CBN) Governor to clear FX transaction backlogs aimed to boost liquidity and rebuild investor confidence—both essential steps for reinvigorating FPI participation. However, these monetary policy measures must be complemented by supportive fiscal actions to ensure an effective increase in FX supply, strengthen reserves, and achieve lasting market liquidity.
Click here to read full PDF copy of report
