Foreign Investment in Nigerian Exchange Declines by Over 50% in One Month

The Nigerian Exchange Limited (NGX) has reported a significant decrease in foreign investment in its markets.

According to the Domestic & Foreign Portfolio Investment Report for March 2023, transactions conducted by foreign investors fell by 53.16% from N19.62bn in February to N9.19bn in March, equivalent to about $42.51m to $19.94m respectively.

The decline marks a considerable setback in the efforts to attract foreign investment into Nigeria.

The report shows that total transactions conducted by domestic investors also dropped by 19.06% from N169.29bn in February to N137.03bn in March.

However, the decline in foreign investment was much more significant, with the total value of transactions by foreign investors decreasing by 88% compared to transactions by domestic investors, which stood at 96% in March 2023.

The decrease in foreign investment is attributed to several factors, including the uncertainty around exchange rates and the unfavorable business environment.

Prof Olawale Ajai of the Lagos Business School pointed out that insecurity and the opaque Naira foreign exchange regime have made Nigeria unattractive to foreign investors.

He also noted that low national productivity, infrastructure deficits, and poor human capital development have contributed to the decline.

The Director-General of the Securities and Exchange Commission, Lamido Yuguda, also highlighted the forex challenges facing foreign investors, citing the delay in accessing foreign exchange for the repatriation of their dividends or capital.

He added that the reduced proportion of foreign investors in the Nigerian capital market was not permanent, and he expected the foreign exchange situation in Nigeria to improve substantially.

The decline in foreign investment is a cause for concern for the Nigerian economy, which is heavily reliant on foreign investment to drive growth.

The government must take urgent steps to address the challenges facing foreign investors and create a more favorable business environment to attract more foreign investment.