Foreign Investors Withdraw N455bn from Nigerian Stock Market Amid FX Crisis and Inflation
Summary
Foreign investors withdrew a total of N455.62bn from the Nigerian stock market in 2024, as currency volatility and inflation eroded confidence in the economy. The outflows surpassed inflows, highlighting a persistent trend of capital flight despite government efforts to stabilize the naira.
Breakdown of Foreign Transactions in 2024
According to the Nigerian Exchange Limited’s Domestic and Foreign Portfolio Investment Report, foreign transactions in 2024 totaled N852.03bn, with 53.47% (N455.62bn) exiting the market, while inflows stood at N396.41bn.
• Foreign participation remained low, accounting for only 15.25% of total transactions, while domestic investors dominated with 84.75% (N4.73tn).
• The continuous depreciation of the naira and rising inflationary pressures contributed to investor uncertainty.
Monthly Trends in Foreign Inflows and Outflows
The data revealed fluctuating investor sentiment throughout the year:
First Half of 2024:
• January: Foreign outflows at N37.33bn, inflows at N15.78bn, net outflow N21.55bn
• February: Outflows N40.88bn, inflows N24.93bn, net outflow N15.95bn
• March: Inflows N52.66bn, outflows N41.60bn → First month with net inflow
• April: Outflows surged to N78.25bn, inflows N42.58bn, largest net outflow (N35.67bn)
• May: Outflows N69.41bn, inflows N54.87bn, net outflow N14.54bn
• June: Outflows N43.94bn, inflows N38.25bn, net outflow N5.69bn
Second Half of 2024:
• July: Outflows dropped to N19.95bn, inflows N37.57bn, net inflow N17.62bn
• August: Outflows N24.38bn, inflows N33.09bn, net inflow N8.71bn
• September: Outflows climbed back to N30.15bn, inflows N11.26bn, net outflow N18.89bn
• October: Outflows N14.15bn, inflows N33.31bn, net inflow N19.16bn
• November: Outflows N15.09bn, inflows N25.85bn, net inflow N10.76bn
• December: Outflows spiked to N40.49bn, inflows N26.26bn, net outflow N14.23bn
Overall: Foreign exits were higher than inflows in seven out of twelve months, showing weak confidence among foreign investors.
Comparisons with 2023 and Domestic Market Trends
• Despite the high outflows, foreign participation in 2024 increased by 107.54% compared to 2023, when total foreign transactions were just N410.62bn.
• Domestic transactions dominated, accounting for 84.75% of total market activity in 2024 (N4.73tn), compared to N3.58tn in 2023, indicating a 56.2% increase in market activity.
• Retail investors accounted for 48.72% of domestic trades (N2.31tn), while institutional investors controlled 51.28% (N2.43tn).
Expert Reactions on the Capital Flight
1. FX Volatility and Inflation Driving Foreign Investors Away
• Charles Sanni (CEO, Cowry Treasurers Limited):
• Foreign investors prefer stability, but currency fluctuations and inflation created uncertainties.
• The NGX performed well, but foreign exchange risks eroded gains.
• To restore confidence, the naira should be stabilized around N1,200/$, and inflation must be controlled.
2. Sovereign Risks and Market Liquidity Concerns
• David Adonri (MD, Highcap Securities):
• Foreign investors remain cautious due to concerns about Nigeria’s sovereign risk, profitability, and liquidity.
• Investors may not be leaving entirely, but they are rebalancing their portfolios and harvesting profits.
• He noted that the CBN’s clearing of trapped funds and removal of capital controls could help attract foreign inflows.
3. Foreign Exchange Issues Affecting Investment Decisions
• Vincent Nwani (Economist & Investment Specialist):
• Foreign participation remains low at 16% (though an improvement from 10% in 2023).
• The departure of multinational firms from Nigeria reflects broader investor concerns about FX repatriation.
• Nigeria needs to focus on exchange rate stability to make the market attractive for foreign investors.
Outlook: What’s Next for the Nigerian Stock Market?
• The CBN’s monetary policies helped stabilize the naira, appreciating it from N1,663.39/$ (November) to N1,535.81/$ (December), a 7.67% gain.
• However, foreign investment remained low despite the stronger naira, indicating that investors prioritize economic stability over short-term currency movements.
• Experts suggest that Nigeria must implement clear FX repatriation policies, improve capital market regulation, and ensure economic stability to attract and retain foreign investors.
Final Thoughts
While the Nigerian stock market saw strong domestic participation, the continuous withdrawal of foreign funds signals persistent concerns about economic instability. Addressing currency volatility, inflation, and investor confidence issues will be key to reversing capital flight trends in 2025.
Summary
Foreign investors withdrew a total of N455.62bn from the Nigerian stock market in 2024, as currency volatility and inflation eroded confidence in the economy. The outflows surpassed inflows, highlighting a persistent trend of capital flight despite government efforts to stabilize the naira.
Breakdown of Foreign Transactions in 2024
According to the Nigerian Exchange Limited’s Domestic and Foreign Portfolio Investment Report, foreign transactions in 2024 totaled N852.03bn, with 53.47% (N455.62bn) exiting the market, while inflows stood at N396.41bn.
• Foreign participation remained low, accounting for only 15.25% of total transactions, while domestic investors dominated with 84.75% (N4.73tn).
• The continuous depreciation of the naira and rising inflationary pressures contributed to investor uncertainty.
Monthly Trends in Foreign Inflows and Outflows
The data revealed fluctuating investor sentiment throughout the year:
First Half of 2024:
• January: Foreign outflows at N37.33bn, inflows at N15.78bn, net outflow N21.55bn
• February: Outflows N40.88bn, inflows N24.93bn, net outflow N15.95bn
• March: Inflows N52.66bn, outflows N41.60bn → First month with net inflow
• April: Outflows surged to N78.25bn, inflows N42.58bn, largest net outflow (N35.67bn)
• May: Outflows N69.41bn, inflows N54.87bn, net outflow N14.54bn
• June: Outflows N43.94bn, inflows N38.25bn, net outflow N5.69bn
Second Half of 2024:
• July: Outflows dropped to N19.95bn, inflows N37.57bn, net inflow N17.62bn
• August: Outflows N24.38bn, inflows N33.09bn, net inflow N8.71bn
• September: Outflows climbed back to N30.15bn, inflows N11.26bn, net outflow N18.89bn
• October: Outflows N14.15bn, inflows N33.31bn, net inflow N19.16bn
• November: Outflows N15.09bn, inflows N25.85bn, net inflow N10.76bn
• December: Outflows spiked to N40.49bn, inflows N26.26bn, net outflow N14.23bn
Overall: Foreign exits were higher than inflows in seven out of twelve months, showing weak confidence among foreign investors.
Comparisons with 2023 and Domestic Market Trends
• Despite the high outflows, foreign participation in 2024 increased by 107.54% compared to 2023, when total foreign transactions were just N410.62bn.
• Domestic transactions dominated, accounting for 84.75% of total market activity in 2024 (N4.73tn), compared to N3.58tn in 2023, indicating a 56.2% increase in market activity.
• Retail investors accounted for 48.72% of domestic trades (N2.31tn), while institutional investors controlled 51.28% (N2.43tn).
Expert Reactions on the Capital Flight
1. FX Volatility and Inflation Driving Foreign Investors Away
• Charles Sanni (CEO, Cowry Treasurers Limited):
• Foreign investors prefer stability, but currency fluctuations and inflation created uncertainties.
• The NGX performed well, but foreign exchange risks eroded gains.
• To restore confidence, the naira should be stabilized around N1,200/$, and inflation must be controlled.
2. Sovereign Risks and Market Liquidity Concerns
• David Adonri (MD, Highcap Securities):
• Foreign investors remain cautious due to concerns about Nigeria’s sovereign risk, profitability, and liquidity.
• Investors may not be leaving entirely, but they are rebalancing their portfolios and harvesting profits.
• He noted that the CBN’s clearing of trapped funds and removal of capital controls could help attract foreign inflows.
3. Foreign Exchange Issues Affecting Investment Decisions
• Vincent Nwani (Economist & Investment Specialist):
• Foreign participation remains low at 16% (though an improvement from 10% in 2023).
• The departure of multinational firms from Nigeria reflects broader investor concerns about FX repatriation.
• Nigeria needs to focus on exchange rate stability to make the market attractive for foreign investors.
Outlook: What’s Next for the Nigerian Stock Market?
• The CBN’s monetary policies helped stabilize the naira, appreciating it from N1,663.39/$ (November) to N1,535.81/$ (December), a 7.67% gain.
• However, foreign investment remained low despite the stronger naira, indicating that investors prioritize economic stability over short-term currency movements.
• Experts suggest that Nigeria must implement clear FX repatriation policies, improve capital market regulation, and ensure economic stability to attract and retain foreign investors.
Final Thoughts
While the Nigerian stock market saw strong domestic participation, the continuous withdrawal of foreign funds signals persistent concerns about economic instability. Addressing currency volatility, inflation, and investor confidence issues will be key to reversing capital flight trends in 2025.