Investors embrace Nigerian stocks, with portfolio investment rising by N40.5 billion

Domestic transactions accounted for 70.33% while foreign transactions accounted for 29.67% of the total transactions.

By Research Team

The Nigerian Stock Exchange appears to be gaining significant traction as total portfolio investments rose by N40.5 billion in September 2020.

This was contained in the domestic and foreign investments report released by the Nigerian Stock Exchange (NSE).

According to the report, the total portfolio investments rose by 42.9% compared to 94.45 billion recorded in August 2020. The breakdown of the report shows that domestic transactions accounted for 70.33% of the total transactions, while foreign transactions accounted for 29.67% of the total transactions in September.

Key highlights

• Total domestic transactions completed year to date (YTD) is about N825.94 billion, while foreign transactions completed YTD is about N510.25 billion.
• Foreign inflows decreased by 71.67% since the last rise in September 2019, while Foreign Outflows decreased by 70.31% since the last rise in March 2020.
• The total value of transactions completed by Domestic Investors in September 2020 surpassed that of the total value of transactions completed by Foreign Investors by N54.87 billion.
• Portfolio investments increased sharply by 42.9% from N94.45 billion (about $244.27 million) in August 2020 to N134.97 billion (about $349.85million) in September 2020.
• Compared with September 2019 (N141.45 billion), the performance of the current month indicates that total transactions decreased by 4.58%.

As illustrated in the chart, total transactions completed between August and September 2020 indicated that total domestic transactions surged by 71.12% from N55.47 billion in August to N94.92 billion in September.

Also, total foreign transactions increased by 2.74% in September 2020 from N38.98 billion (about $100.81 million) in August 2020 to N40.05 billion (about $103.81million) in September 2020.

Meanwhile, for domestic transactions, analysis revealed that Institutional Investors outperformed Retail Investors by N23.54 billion.

A comparison of domestic transactions in the current and prior month (August 2020), revealed that both retail and institutional transactions increased by 34.12% from N26.61 billion in August 2020 to N35.69 billion in September 2020, and 105.23% from N28.86 billion in August 2020 to N59.23 billion in September 2020 respectively.

For foreign transactions, analysis revealed that Foreign Outflow outperformed Foreign Inflow by N12.05 billion. A comparison of foreign transactions in the current and prior month (August 2020) revealed that Foreign Inflow declined by 20.72% from N17.66 to N14 billion, while Foreign Outflow increased by 22.19% from N21.32 to N26.05 billion.

What you should know

• Over a 6-year period, based on the data available on the NSE, analysis indicated that total domestic transactions decreased by 67.94% from N296.06 billion in September 2014 to 94.92 billion in September 2020; while total foreign transactions decreased by 82.33% from N226.68 billion in September 2014 to N40.05 billion in September 2020.
• Total domestic transactions accounted for 70.33% of the total transactions carried out in September 2020, while foreign transactions accounted for 29.67% of the total transactions in the same period.

What this means

Considering the importance of foreign investment, the decline is particularly alarming and could indicate that foreign investors are shying away from Nigerian stocks. Meanwhile, more Nigerian investors are venturing into the market compared to previous months.

However, the encouraging factor is that total foreign and domestic portfolio figure recorded in September is the highest since the dip in March. This may well mean that stocks are beginning to pick up, which is good news for stock investors.

Research Team

Nairametrics Research team tracks, collates, maintains and manages a rich database of macro-economic and micro-economic data from Nigeria and Africa. Our analysts share some of the data collated on Nairametrics, using formats such as docs, tables and charts etc. The team also publishes research based analysis as articles on a regular basis.