Foreign investors have spent $43 billion buying shares of companies listed on the Nigerian Stock Exchange (NSE) between 2007 and 2013; figures fromNigeria’s National Bureau (NBS) of Statistics have shown.
Information released by the NBS last week showed how foreigners brought into the country $15.66 billion (N2.6 trillion) in 2013 to buy shares of companies listed on the Exchange. This amount represented 73.5% of the $21.3 billion (N3.54 trillion) foreign investment inflow into Nigeria in 2013.
Since 2007, foreign investors have spent $43.1 billion buying up shares of companies listed on the NSE. The appetite for shares increased almost four fold between 2012 and 2013 as foreign investors splashed a total of $27 billion on shares which was almost twice higher than the $15 billion spent from 2007 to 2011.
The sharp increase in appetite for shares in 2012 is traced to a change in policy by the Central Bank of Nigeria (CBN) to allow investors to bring in money to invest in shares or bonds and take them out whenever they decide to without any restrictions. Before the change in policy, foreign investors were compelled to keep such investments in the country for a minimum period of six months. Some analysts have criticized the CBN change in policy saying it has allowed in the inflow of “hot money.”
Hot money is very short term money that can leave a system anytime. When such monies are withdrawn from the system suddenly, it can lead to the sudden and sharp devaluation of a country’s currency, triggering a financial crisis in the system. Many analysts see Nigeria as currently prone to financial crisis caused by having too much of hot money in its financial system.
The NBS data however, shows that the taste by foreign investors for Nigerian shares slowed down in the first three months of this year (2014). Foreign investors spent $2.77 billion (459 billion) buying up shares of in the first quarter of 2014 about half of the $5.24 (N870 billion) spent in the first quarter of 2013. However, foreign investment in shares still accounted for 71% of all foreign investment inflow into the country in the first quarter of 2014.