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Foreign investors divested from equities totaling N576.09 billion on the Nigerian Exchange from January to June 2025, marking an 84.97% increase compared to the N311.41 billion pulled out during the same timeframe in 2024.
The outflows outnumbered foreign inflows, which were at N559.25 billion, leading to a net negative foreign portfolio position of N16.84 billion over six months.
The data, sourced from the NGX’s June 2025 Domestic and Foreign Portfolio Investment Report, indicates a heightened level of foreign trading activity compared to the previous year.
Overall foreign transactions amounted to N1.14 trillion in the first half of the year, more than double the N540.48 billion recorded in H1 2024.
Economists attribute the rise in outflows to market inconsistencies stemming from U.S. President Donald Trump’s policies, along with attractive yields on treasury bills, prompting sell-offs.
Meanwhile, domestic investors engaged in trades worth N3.06 trillion between January and June 2025, accounting for 72.92% of total market transactions, a 41.5% rise from N2.17 trillion during the same period last year. Institutional investors contributed N1.59 trillion, while retail investors traded N1.47 trillion.
The near balance between retail and institutional trading suggests a stable domestic participation during the six-month period, though recent trends indicate growing institutional dominance.
Total transactions on the Exchange during this period amounted to N4.19 trillion, reflecting a 60.98% increase from N2.60 trillion in H1 2024.
While this growth is encouraging, it simultaneously masks concerns regarding the quality of capital inflows, particularly the surge in foreign outflows and dwindling retail engagement. Monthly data breakdowns depict volatile investor behaviors, with marked fluctuations in both foreign and domestic trading.
January 2025 began with transactions at N346.23 billion, comprising N269.39 billion domestically and N76.84 billion from foreign sources. Domestic retail and institutional trades were nearly equal at N134.17 billion and N135.22 billion, respectively.
In February, activity increased to N448.52 billion, with foreign inflows at N43.67 billion and outflows at N47.93 billion, indicating a slight net negative flow. Retail participation decreased to N123.38 billion, while institutional trades rose to N170.54 billion, suggesting a gradual increase in institutional stakes.
March saw the highest levels of activity in H1 2025, with total transactions reaching N1.29 trillion, driven by a significant spike in foreign inflows amounting to N349.97 billion, eclipsing the total of all other months.
Outflows were recorded at N205.54 billion, resulting in a net gain of N144.43 billion. Institutional investors increased their participation to N273.74 billion, while retail trades escalated to N212.77 billion.
However, April marked a downturn, with total trades plummeting to N487.39 billion, as foreign inflows fell to N26.47 billion and outflows surged to N70.20 billion.
Retail trades decreased to N174.10 billion, and institutional investors also slowed their momentum to N180.62 billion, coinciding with a US-imposed 14% tariff on Nigeria.
In May, foreign outflows remained high at N60.94 billion, while inflows were subdued at N24.12 billion. Institutional investors increased their trading to N244.13 billion, while retail investors slightly raised their activities to N337.46 billion, with total trades in May amounting to N700.50 billion.
June saw another month of robust trading, with total transactions hitting N778.65 billion, the second-highest after March. Foreign inflows improved to N72.82 billion, while outflows eased to N66.49 billion, culminating in a positive net foreign position of N6.33 billion. Institutional investors accounted for N364.71 billion in June, marking a 49.39% increase from May, while retail trades dropped by 18.62% to N274.63 billion. The foreign investment trajectory over the six months reflects a sensitivity to foreign exchange liquidity and the need for clear policies.
The naira's appreciation to N1,529.71/$1 in June from N1,586.15/$1 in May may have aided a slight recovery in inflows. Nevertheless, the dominance of outflows indicates ongoing concerns regarding foreign exchange repatriation and macroeconomic stability.
Observations highlighted by PUNCH reveal that institutional investors have gradually established a stronger position over retail investors in the past months; the two groups were nearly equal in January and February, but institutional trades began outpacing retail transactions from March onward.
The disparity became more pronounced in June, with institutional trades at N364.71 billion against retail’s N274.63 billion. Retail participation peaked in May at N337.46 billion before declining in June, likely influenced by inflationary pressures that have curtailed real wages and disposable income for investments.
With inflation exceeding 22%, households increasingly prioritize necessary expenditures over saving or investing. In contrast, the rise in institutional activity signals a reallocation of portfolios by pension funds and asset managers seeking better returns in the face of rising inflation and lackluster fixed-income yields.
Despite a 61% year-on-year jump in market turnover, the make-up of investors raises crucial questions about the sustainability of market expansion. Foreign investors continue to engage but remain cautious, as seen in the persistent outflows.
Analysts note that leadership is not predominantly the issue. Commenting on these developments, financial analyst Johnson Chukwu emphasized the inconsistencies in Trump’s trade policies, yet acknowledged that foreign portfolio investors remain active in the Nigerian market.
He pointed out that, according to the Q1 2025 capital importation report, foreign portfolio investment constituted the largest share of total portfolio capital importation, with foreign portfolio investment accounting for approximately $5.20 billion of the $5.64 billion entering the economy, predominantly targeted at fixed-income instruments like treasury bills due to guaranteed returns.
Chukwu remarked on the noticeable disinterest from foreign investors in Nigerian equities, suggesting they might perceive them as overpriced, given that the market had gained over 40% without substantial changes in economic fundamentals.
Managing Director/CEO of Arthur Stevens Asset Management Limited, Olatunde Amolegbe, described foreign portfolio investors mainly as traders who sell off once they perceive profits, which does not preclude future reinvestment.
He asserted that while inflows have remained stable with investor sales, there’s a trend where investments often begin in the fixed-income market, which serves as a conduit to equities, particularly due to larger volumes in fixed-income instruments compared to equities.
A research analyst, Dayo Adenubi, elaborated that foreign portfolio investors are usually driven by data-intensive models and short-term strategies.
He highlighted that many operate in Nigeria through actively managed index funds, facing pressure to exceed performance benchmarks and obtain substantial returns for their investors.
The aggressive pursuit of returns often leads to a short-term investment approach.
