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Foreign Investors Dump Nigerian Equities

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Nigerian Exchange Limited - Investors King
  • Foreign Investors Dump Nigerian Equities

For every unit of purchase being made at the Nigerian stock market by foreign investors, they are selling two units as political risks and macroeconomic uncertainties continue to reduce investors’ appetite for Nigerian equities.

Trading data on domestic and foreign portfolio investments (FPI) at the Nigerian Stock Exchange (NSE) showed that foreign investors’ outflows from the equities market increased by 124.7 per cent to about N131 billion in May as against N58.25 billion in April. However, there was a 3.45 per cent decrease in foreign inflows to N62.06 billion in May as against N64.28 billion recorded in April.

The FPI report used two key indicators-inflow and outflow, to gauge foreign investors’ mood and participation in the stock market as a barometer for the economy. Foreign portfolio investment outflow includes sales transactions or liquidation of equity portfolio investments through the stock market while inflow includes purchase transactions on the NSE. The NSE report is generally regarded as a credible gauge of foreign portfolio investments in Nigeria as it coordinates data from nearly all active investment bankers and stockbrokers.

Total transactions at the equities market increased by 49.96 per cent from N212.23 billion recorded in April to N318.27 billion in May.

A five-month report showed that the cumulative transactions from January to May increased by 97.13 per cent to N1.409 trillion in 2018 compared with N714.99 billion recorded in the same period of 2017.

The latest report stated that the institutional composition of the domestic market increased by 97.87 per cent from N46.51 billion in April to N92.03 billion in May. The retail composition declined by 22.92 per cent from N43.19 billion in April to N33.29 billion in May.

In April, there was a positive net foreign inflow of N6.03 billion in April 2018 and N36.91 billion for the four-month period ended April 2018. In the comparable period ended April 2017, Nigerian equities had suffered net FPI deficit of N79.73 billion. Further analysis indicated positive net foreign inflow of N30.88 billion in first quarter 2018 compared with a negative net foreign investment position of N86.36 billion in comparable first quarter 2017.

Month-on-month analysis had shown a positive trend in net foreign investment inflow throughout the first quarter 2018. Foreign inflow totalled N91.75 billion in January 2018 as against outflow of N74.64 billion. Foreign inflow and outflow stood at N44.89 billion and N38.33 billion respectively in February 2018 while foreign inflow and outflow recovered to N69.71 billion and N62.50 billion respectively in March 2018.

Total transactions at the Nigerian equities market in first quarter 2018 had stood at N878.97 billion compared with N454.48 billion recorded in first quarter 2017. Nigerian domestic investors had accounted for N497.15 billion in first quarter 2018 as against N243.42 billion in comparable period of 2017.

Is the CEO/Founder of Investors King Limited. A proven foreign exchange research analyst and a published author on Yahoo Finance, Businessinsider, Nasdaq, Entrepreneur.com, Investorplace, and many more. He has over two decades of experience in global financial markets.

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Finance

Nigeria’s Public Debt Hits ₦121.67 Trillion as Borrowings Surge – DMO

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The Debt Management Office (DMO) of Nigeria has announced that the country’s total public debt has risen to ₦121.67 trillion ($91.46 billion) as of March 31, 2024.

This represents an increase of ₦24.33 trillion from the ₦97.34 trillion ($108.23 billion) recorded at the end of December 2023.

The surge in debt is attributed to both domestic and external borrowings by the Federal Government, the 36 state governments, and the Federal Capital Territory (FCT).

The DMO’s report reveals that Nigeria’s domestic debt now stands at ₦65.65 trillion ($46.29 billion), while the external debt is ₦56.02 trillion ($42.12 billion).

The DMO noted that the rapid increase in public debt is largely due to new borrowing to partially finance the 2024 Budget deficit and the securitization of a portion of the ₦7.3 trillion Ways and Means Advances at the Central Bank of Nigeria (CBN).

“The increase was from new borrowing to part-finance the 2024 Budget deficit and securitization of a portion of the ₦7.3 trillion Ways and Means Advances at the Central Bank of Nigeria,” the DMO stated.

Despite the rising debt, the DMO remains optimistic about future debt sustainability, contingent on improvements in government revenue.

“Whilst borrowing, as provided in the 2024 Appropriation Act, will continue, we expect improvements in the Government’s Revenue to enhance debt sustainability,” the DMO added.

The increase in debt comes at a time when President Bola Tinubu is preparing to present the 2024 Supplementary Budget to the National Assembly.

This follows the President’s approval of the ₦28.7 trillion 2024 Appropriation Bill on January 1, 2024, which was ₦1.2 trillion higher than the budget originally proposed in November 2023.

The 2024 budget, dubbed the “Budget of Renewed Hope,” set ambitious targets, including pegging the oil price at $77.96 per barrel and estimating daily oil production at 1.78 million barrels.

However, the naira has faced severe depreciation, plunging to nearly ₦2,000/$1 in February, before stabilizing around ₦1,500/$1.

Economic analysts warn that the escalating debt and currency depreciation could pose significant challenges to Nigeria’s economic stability.

The government’s ability to manage its borrowing and stimulate revenue generation will be critical in navigating these fiscal pressures.

As Nigeria grapples with these economic realities, the focus remains on finding sustainable solutions to manage the growing debt burden while fostering economic growth and stability.

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Banking Sector

Federal High Court Sets Date for Contempt Hearing in GTB vs. AFEX Loan Case

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The Federal High Court in Lagos has scheduled June 27, 2024, for the next hearing in the ongoing contempt suit filed by Guaranty Trust Bank Plc (GTB) against directors of AFEX Exchange Commodities Limited.

The case revolves around a disputed N17.81 billion loan obtained under the Central Bank of Nigeria’s Anchor Borrowers’ Programme.

Presiding over the court, Justice Chukwujekwu Aneke set the date following a session where arguments were presented by the plaintiff’s lead counsel, Mr. Ade Adedeji (SAN), and the respondent’s counsel, Prof. Olawoyin (SAN).

The core issue pertains to the alleged disobedience of a court order by the directors of AFEX Exchange Commodities Limited.

GTB, through its counsel Ajibola Aribisala (SAN), has accused AFEX and its directors—Ayodele Balogun, Jendayi Fraaser, Justin Topilow, Mobolaji Adeoye, and Koonal Ghandi—of contempt for failing to comply with a court directive.

The bank alleges that these directors did not appear in court as mandated, which led to the initiation of contempt proceedings.

During the latest session, Adedeji emphasized the necessity for the directors to appear in person, stating, “My lord, the parties in contempt are not in court. The contemnors cannot sit in the comfort of their homes and send a lawyer to court in contempt proceedings. The law is trite that they must appear before the court.”

In response, Olawoyin argued that he had only recently been briefed on the matter and was not fully aware of the prior developments.

He noted that some of the individuals listed as directors were no longer with the company, adding that one current director, Mr. Akinyinka, was present in court, while another was on pilgrimage.

The contempt case traces back to a suit marked FHC/L/CS/911/2024, where GTB sought to recover the loan amount through legal measures.

On May 27, Justice Aneke granted an interim Global Standing Instruction (GSI) injunction, which directs over 20 banks to transfer funds credited to AFEX into its account with GTB until the debt is settled.

Also, the court authorized GTB to take possession of AFEX’s 16 warehouses across seven states and sell the commodities stored within, as these were procured using the CBN’s loan facility.

The N17.81 billion loan comprises N15.77 billion in principal and interest outstanding as of April 17, 2024, and an additional N2.04 billion covering recovery costs and incidental expenses.

As the court prepares for the next hearing, the financial and legal communities are closely watching the proceedings.

The outcome will significantly impact not only the involved parties but also set a precedent for handling similar cases in the future.

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Banking Sector

CRC Credit Bureau Celebrates 15 Years with Record 14% Credit Penetration in Nigeria

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CRC Credit Bureau Limited celebrated its 15th anniversary with a record 14% credit penetration rate.

The occasion was marked with the CRC Finance and Credit Conference 2024 held in Lagos, where key industry stakeholders gathered to reflect on the bureau’s journey and discuss future trends in credit risk management.

Founded in January 2010 and licensed by the Central Bank of Nigeria (CBN), CRC Credit Bureau has played a pivotal role in enhancing access to credit across Nigeria.

Dr. Tunde Popoola, the Group Managing Director/CEO of CRC Credit Bureau Limited, highlighted the bureau’s journey, noting that from its inception with a single product, CRC has expanded its offerings to 18 products covering all aspects of the lending value chain.

Speaking at the conference, Dr. Popoola underscored the bureau’s contribution to Nigeria’s financial sector, stating, “CRC Credit Bureau has been instrumental in transforming access to credit in Nigeria over the past 15 years. We started with a vision to simplify credit access through reliable data and have since grown to serve millions of Nigerians.”

The event focused on the theme “Sustainable Financing Options: Innovations in Credit Risk Management,” emphasizing the importance of sustainable finance amid economic challenges.

The conference provided a platform for stakeholders to discuss strategies for mitigating risks and enhancing the efficiency of credit operations in Nigeria.

Reflecting on the current state of credit penetration, Dr. Popoola noted that while Nigeria has made significant progress, the 14% penetration rate still falls below global benchmarks.

He highlighted that CRC Credit Bureau currently holds credit scores for 33 million Nigerians, facilitating over 29.4 million searches in 2023 alone, with an additional 10 million searches conducted in the first quarter of 2024.

Joel Owoade, Chairman of CRC’s Board of Directors, acknowledged the economic headwinds impacting businesses in Nigeria but stressed the importance of sustainable financing to mitigate risks associated with lending.

“As we navigate economic fluctuations, sustainable financing remains crucial to fostering economic stability and growth,” Owoade remarked.

The conference also featured insights from industry experts on leveraging artificial intelligence (AI) in credit risk management and regulatory frameworks to support AI-driven innovations.

Olaniyi Yusuf, Managing Partner of Verraki, highlighted the potential of AI to create jobs and enhance economic productivity, calling for supportive regulatory environments that balance innovation with risk management.

Representatives from the Central Bank of Nigeria (CBN) emphasized the regulator’s efforts to promote sustainable credit practices.

Dr. Adetona Adedeji, Acting Director of the Banking Supervision Department at CBN, outlined initiatives such as the National Collateral Registry and Global Standing Instruction aimed at enhancing credit access while minimizing risks.

As CRC Credit Bureau looks ahead, Dr. Popoola expressed optimism about the future, stating, “We remain committed to driving greater financial inclusion and expanding credit access in Nigeria. Our focus is on leveraging technology and strategic partnerships to deliver innovative solutions that meet the evolving needs of consumers and lenders.”

The celebration of CRC Credit Bureau’s 15th anniversary underscored its pivotal role in Nigeria’s financial sector, marking a milestone in the nation’s journey towards broader financial inclusion and sustainable economic growth.

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