National Election: Capital Outflow Rises to N435.41 Billion

• National Election: Capital Outflow Rises to N435.41 Billion

Capital outflow from the Nigerian Stock Exchange (NSE) has risen to a record high in recent months, following the continuous withdrawal of funds by foreign portfolio investors ahead of the national election.

The data from the NSE showed a total of N435.41 billion was withdrawn from the market between January and July 2018, high than the outflow of N234.32 billion recorded during the same period of 2017.

The market capitalisation of listed equities that rose from N13.617 trillion earlier this year when global oil prices, increased foreign reserves, stable foreign exchange market and declining inflation bolstered its value to N16.154 trillion on January 19, closed on Friday at N11.88 trillion.

Alice Tomdio, the Associate Director, Capital Markets, PwC Nigeria, said: “Once there is any cause to fear, portfolio investors sell out their shares and they come back when the environment is better; all of these create a lot of volatility in the market and may be one of the reasons why we do not have a lot of initial public offerings in the country.”

She further stated that domestic investors should be encouraged to participate more in the capital market.

Between 2011 to 2015, foreign transactions have outperformed domestic transactions, but since 2016 domestic transactions slightly outperformed foreign transactions, accounting for 52 percent of total transaction value in 2017.

Foreign transactions declined by 64.68 percent from N102.41 billion in June to N36.17 billion in July, while domestic transactions rose from N29.12bn in June to N65.42bn in July. Representing 50.48 percent more than foreign transactions.

Tomdio attributed the decline in foreign portfolio to the uncertainty surrounding national election, global trade wars and rising interest rates in developed economies, especially after China announced on Saturday that she would not be meeting with the U.S to discuss tariffs imposition.