Foreign investors have shown a significant drop in appetite for dealing in Nigerian stocks, the latest data from the Nigerian Stock Exchange (NSE) has shown. The figures from the NSE shows that foreign investors bought and sold just N43.37 billion worth of stocks on the NSE in January 2016, which is a 56 percent decrease compared to N99.41 billion in the same period of 2015.
Interestingly, domestic investors did not step in to fill the hole left by foreign investors as domestic investors also reduced the purchase of Nigerian shares by 55 percent from N90.61 billion to N40.73 billion.
The drop in the transactions done by both foreign and domestic investors led to a significant drop in total transactions done on the NSE in January 2016 by 55.67 percent from N189.72 billion in January 2015 to N84.10 billion in January 2016.
The cut in foreign investor inflow has been blamed on Nigeria’s refusal to devalue the naira despite the feeling that the country does not have enough foreign reserves to sustain the current exchange rate of the currency.
The NSE figures show that foreign investors took out N26.36 billion from the stock market in January 2016 and invested just N17 billion which show a negative outflow of N9 billion three times the negative outflow of N3 billion recorded in the comparable period of January 2015.
But while it is easy to understand that foreign investors are fleeing the Nigerian market because of the fear of being exposed to losses if Nigeria decides to devalue the naira, it is a difficult to understand why Nigerian investors are equally dumping stocks except out of fear that quoted companies are not going to do well this year. Already three listed companies have given profit warning this year.
They are FCMB, First Bank and the latest is Computer Warehouse Group.
The NSE figures show that retail investors cut back their investments most. Retail investors reduced their exposure to the Nigerian stock market by 69 percent from N60.08 billion in January 2015 to just N18.88 billion in January 2016.
Comparably, domestic institutional investors cut their exposure to the market by just 28 percent from N30.53 billion to N21.85 billion.
