In 2016, Foreign investors lost faith in Nigerian stocks

KKR

Foreign portfolio investors severely punished the Nigerian Stock Exchange in 2016 as their investment in the bourse declined by 49.51% from NGN1 trillion recorded at the end of 2015 to N517.55 billion at the end of 2016.

The Nigerian Stock Exchange released the data earlier today. The data was collated from s trading figures from major custodians and market operators on their foreign portfolio investment (FPI) flows.

Total transaction at the NSE from January to December 2016 decreased significantly by 39.58% from N1,9 trillion recorded within the same period in 2015 to N1,1 trillion at the end of 2016.

The most active period on the bourse was between November and December when transactions increased by 48.91% from N64.39 billion recorded in November 2016 to
N95.88 billion (about $0.31 billion) in December 2016.

Domestic investors also ran out of the premier stock market as total transactions decreased by 28.02% from N880.56 billion to N633.82 billion within the same period.

The only positive is that as opposed to previous years, foreign transactions have consistently outperformed domestic transaction since 2011. In 2016, domestic transactions slightly outperformed foreign transactions in 2016 accounting for 55% of the total transactions in 2016.

The likelihood of a rebound in crude prices and a more stable economic outlook might swing the pendulum. However, analysts see another side to this perspective. Foreign investors are bound to stay away for another 12 months until major risks are addressed.

The scarcity of Forex has reduced liquidity in the markets. Foreign portfolio investors with short term strategies are bound to deemphasize their holdings in Nigerian stocks and securities.