Domestic Investors Dominate as Equity Trading Hits N2.35tn in Five Months

The total transactions on the Nigerian Stock Exchange surged to N2.35 trillion by the end of May 2024, representing a 115.40% increase compared to the first five months of 2023.

This was disclosed in the domestic and foreign portfolio participation in the equity trading report released by the Nigerian Exchange Limited (NGX) on Thursday.

According to the report, domestic investors maintained their dominance in the market, accounting for N1.79 trillion (79.63%) of the total transactions in the five-month period.

In contrast, foreign investors contributed N458.29 billion (20.37%) to the market.

A further breakdown of the data revealed that domestic institutional investors led the charge with N906 billion in transactions, slightly ahead of domestic retail investors, who recorded N885.19 billion.

The growth in equity trading has been attributed to several critical reforms initiated in the past year.

Since May 2023, Nigeria has undergone a significant leadership change, leading to the implementation of key policies such as foreign exchange market harmonization and the removal of fuel subsidies.

Experts believe these reforms have boosted the capital market and encouraged foreign investors to reconsider their positions in Nigeria.

Also, the Monetary Policy Rate (MPR) has been hiked multiple times, reaching 26.25% at the May 2024 Monetary Policy Committee meeting.

This tightening monetary policy has also influenced the market dynamics, contributing to increased trading activities.

A recent report by PricewaterhouseCoopers (PwC), titled “Navigating Economic Reforms,” highlighted the impressive performance of the Nigerian Stock Exchange.

The report noted an 85.2% increase in market capitalization, from N30.3 trillion in May 2023 to N56.5 trillion in May 2024.

This growth was driven by positive sectoral index performances, particularly in the oil and gas (124%), consumer goods (104%), insurance (88%), and banking (69%) sectors.

The Nigeria 10-Year Government Bond Yield also reached an all-time high of 19.30% in May 2024, up from 14.55% in May 2023.

This increase in bond yields is attributed to the attractive rates on Open Market Operations (OMO) and Treasury Bills, spurred by the rise in the MPR.

Month-on-month data from NGX showed that total transactions rose from N346.23 billion in April to N355.38 billion in May, reflecting a 2.64% increase.

Domestic investors played a pivotal role in driving this increased activity, with their participation rising by 2.53% from N225.40 billion in April 2024 to N231.10 billion in May 2024.

Within this period, institutional investors outperformed retail investors by a margin of two percent, recording N117.57 billion compared to N113.53 billion.

Meanwhile, total foreign transactions also saw an increase, rising by 2.86% from N120.83 billion in April to N124.28 billion in May 2024.

This uptick in foreign participation is a positive signal, indicating a gradual return of international investors to the Nigerian market.

The sustained growth in equity trading and the dominance of domestic investors underscore the resilience and potential of the Nigerian stock market.

With ongoing reforms and a more stable economic environment, the outlook for the local bourse remains positive, promising further growth and opportunities for both domestic and foreign investors.