Dramatic Drop in Foreign Portfolio Investment in Nigeria’s Equities Market
In a striking turn of events, foreign portfolio investment into Nigeria’s equities market fell sharply by 92.39% in April 2025. While the inflows for March had reached a robust N349.97 billion, April saw this figure plummet to just N26.64 billion. This sharp decline underscores the shifting dynamics of international investment amidst global uncertainty.
The Impact of Block Trades and Market Dynamics
The significant drop in foreign investment can largely be attributed to the absence of block trades that had bolstered activity in March. These larger transactions often play a critical role in driving up market engagement, yet their absence in April has left a noticeable void. International investors are increasingly approached with caution as geopolitical tensions and economic uncertainties loom over the global landscape.
Recent statistics from the Nigerian Exchange (NGX) illustrate this downturn further. Total foreign transactions also experienced a staggering 90.99% drop, falling from N699.89 billion in March to N63.07 billion in April. With inflows at N26.64 billion and outflows hitting N36.43 billion, the market reported a net capital outflow of N9.79 billion for the month.
A Stark Contrast in Investor Participation
The decline in April represents a drastic reversal of the robust foreign interest previously marked in March, during which foreign transactions constituted 62.74% of total trade. April’s stark reality, with foreign participation dropping to just 13.08%, reflects a diminished appetite for Nigerian equities as investors grapple with underlying risks linked to geopolitical uncertainties.
Total Market Activity Sees a Halving
April 2025 also witnessed a considerable reduction in overall market activity. The total transaction value on the NGX saw a decline of 56.79%, going from N1.115 trillion in March to N482.04 billion in April. However, when compared year-on-year to April 2024—where the total was N346.23 billion—there’s a notable increase of 39.22%. This growth is indicative of improved liquidity conditions experienced in the early part of the year but is tempered by the vulnerabilities exposed in April.
Domestic Investors Take Charge
In April, domestic investors once again cemented their dominance in the market, accounting for N418.97 billion or 86.92% of total trade. This marks a slight uptick of 0.81% from N415.62 billion in March. Interestingly, within the domestic segment, institutional activity rose by 8.77%, moving from N218.50 billion in March to N237.66 billion. This shift signals a growing interest from pension funds, asset managers, and corporations.
In contrast, retail investor activity witnessed an 8.02% decline, dipping from N197.12 billion to N181.31 billion. This downward trend among individual investors indicates a more cautious approach in navigating the current economic landscape. Institutional investors outperformed their retail counterparts by 14% in April, a pattern that continues to be observed throughout this year.
Year-to-Date Performance: A Negative Foreign Position
Despite the upswing in foreign trade during March, the year-to-date (YTD) foreign position remains decidedly negative. For the first four months of 2025, foreign inflows reached N420.32 billion, while outflows were slightly higher at N456.80 billion, resulting in a net outflow of N36.48 billion. This underscores the persistent caution displayed by foreign players in the Nigerian market.
As it stands, domestic investors have thus far accounted for 67.68% of total market activity YTD, while foreign investors contributed 32.32%. This marks a remarkable shift from 2024 when foreign trades represented a mere 13.77% of the market. However, the sustainability of this trend remains uncertain as various economic factors come into play.
A Historical Context of Trading
Looking back over the past 18 years, a review of trading reflects significant developments. Domestic transactions have risen from N3.556 trillion in 2007 to N4.735 trillion in 2024, translating to an increase of 33.15%. Conversely, foreign transactions also saw substantial growth of 38.31% during the same period, climbing from N616 billion to N852 billion.
In 2025 so far, domestic trades reached N1.837 trillion, outpacing foreign trades, which totaled N877.12 billion. This ongoing trend emphasizes consistent domestic dominance, despite occasional spikes in foreign investment.
The Bigger Picture: Global Volatility and Local Repercussions
In April 2025, the global financial landscape saw increased volatility, particularly in light of U.S. President Donald Trump’s announcement regarding sweeping tariffs, including a 14% levy on Nigerian exports. This new policy disrupted international trade flows, particularly affecting sectors outside of oil, thus injecting significant economic uncertainty into Nigeria’s financial outlook.
In response, the Central Bank of Nigeria (CBN) took proactive measures by injecting $200 million into the forex market to stabilize the naira, which had seen fluctuations driven by global economic tensions. Simultaneously, Nigeria’s economic team gathered to assess the implications of these tariffs and devise strategies for mitigating any adverse effects.
Navigating Economic Headwinds
As Nigeria confronts macroeconomic challenges, such as FX rate instability and tightening global financial conditions, the call for deeper reforms becomes increasingly urgent. These measures are necessary not only for attracting sustainable foreign interest but also to ensure the equity market remains stable and resilient amid ongoing uncertainties. Thus, for the foreseeable future, domestic institutions will continue to form the backbone of the Nigerian equities market.
