Global slowdown in emerging market economies continues to impact Nigerian investment growth as both foreign and domestic investments plunged in recent months.
The data released by The Nigerian Stock Exchange (NSE) shows that Foreign Portfolio Investment (FPI) transactions at the nation’s bourse decreased to N69.33 billion (about $0.35 billion) in September 2015 from N81.13 billion (about $0.41 billion) at the end of August 2015; representing a decrease of 14.54%.
Domestic investors conceded about 6.72% of trading to foreign investors compared to the 11.38% they conceded in the previous month as Domestic transactions increased from 44.31% to 46.64% while FPI transactions decreased from 55.69% to 53.36% over the same period.
Foreign portfolio investors’ inflows accounted for 22.52% of total transactions while the outflows accounted for 30.84% of the total transactions in September 2015.
According to the NSE report, in comparison to the same period in 2014, total FPI transactions decreased by 69.42%, whilst the total domestic transactions decreased by 79.53%. FPI outflows outpaced inflows which was not consistent with the same period in 2014. Overall, there was a 75.15% decrease in total transactions in comparison to the same period in 2014.
Total domestic transactions decreased by 33.13% from January to September 2015. The institutional composition of the domestic market which was about 33.69% at the end of January increased to 59.32% at the end of September, whilst the retail composition decreased from 66.31% to 40.68% in the same period.
Total FPI transactions of N 616 bn which accounted for 14.8% of total transactions in 2007 increased over the years to N1.539bn representing 57.5% of total transactions in 2014 (An increase of 42.7% over the 7 year period). Domestic transactions on the other hand started at N3.556bn representing 85.2% in 2007, but decreased significantly to N1.137bn representing 42.5% of total transactions in 2014 (A sharp decline of 42.7% in the 7 year period), according to the NSE report.
The increase in outflows of FPI has been linked to the overall perception of the economy by foreign investors due to emerging market rout, falling global oil prices and numerous sanctions on financial institutions and other corporations in Nigeria. Foreign investors are said to be wary of possible outcome of such decision, hence the outflow.
Also, domestic investors are struggling to adjust to several restriction policies by the CBN which made it hard to invest on a long-term basis. Therefore, they seems to be diverting their funds to more stable investments in order to curtail the gap created by the new monetary policy.