Tinubu's Emergence Boosts Foreign Transactions in Stock Market to N145bn in 6 Months
- Nigeria welcomed more foreign investments as NGX foreign transactions hit N145 billion in the first half of 2023
- The development comes amid the commencement of President Tinubu’s administration
- Earlier in the year, foreign investment was relatively low due to a lot of economic and financial factors
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In the first half of 2023, the total amount of foreign transactions carried out by investors on the floor of the Nigerian Exchange Limited (NGX) increased to N145.08 billion. Data on Domestic and Foreign Portfolio Investment in Nigeria's Equity as of June 2023 show.
This increase coincides with a number of policy changes and the emergence of a new administration.
Legit.ng had earlier examined Tinubu's deft economic moves after 30 days which have been positively received by investors, resulting in a favorable market position that contributed to the growth in the stock value of Nigerian companies.
Source: UGC
The Nigerian Stock Exchange had a poor start to the year with total foreign transactions standing at N62.18 billion in the first four months of 2023 due to high inflation, a protracted FX shortage, and growing election-related uncertainty.
However, Just two months later, the amount rose by N82.9 billion, the data shows.
Analysts believe that the news around the possible and eventual emergence of the president may have led to the spike. In May and June alone, the stock market saw an 37.16 billion and 45.74 billion respectively, reop
Meanwhile, in contrast to the N243.48 billion in the same period of 2022, the half year record is still low, according to Legit.ng's analysis.
What analyst said about this
Reacting to this, analysts have said that the momentum being enjoyed by the market may not last long given that basic structural issues remains unsolved.
Olumide Adesina, a financial analsyt said,
"The markets will most likely cool off, as structural issues remain with the supply side of the FX market much anemic and the neutral outlook on interest rates unlikely to boost FPIs participation"
Similarly, Analysts at Coronation Registrars Limited opined that the market may not rebound this year as foreign portfolio investors are still yet to recover from historical loss from investment in the country.
The company in a report said,
"Our view is that, following many disappointments in the equity market and a significant rearrangement of US and Nigerian market interest rates over the past two years, it is unlikely that foreign portfolio investors will come back in a meaningful way, at least not for the rest of this year."
Recall that Foreign portfolio investment in Nigeria declined steeply after 2019 as risk-free yields on Nigerian Treasury Bills declined.
That happened as the Covid-19 pandemic was about to sweep around the world, disrupting economies and depressing oil prices which, in turn, caused the Central Bank of Nigeria (CBN) to lessen its hitherto generous supplies of US dollars to the foreign exchange markets (from April 2020 onwards).
This led the parallel market exchange rate to break away significantly from the official Naira/US dollar rate. Analyst refered to the period as "dark days for foreign investors", especially those attempting to repatriate dividends, coupons or principal investments.
Domestic transactions dominates
At the end of the reviewed period, there were N1.306 trillion worth of domestic transactions on the Exchange, compared to N145.08 billion worth of foreign transactions.
According to the report, overall transactions at the country's stock exchange climbed by 25.96% from N322.92 billion (or $693.99 million) in May 2023 to N406.75 billion (or $537.87 million) in June 2023. In comparison to June 2022's performance (N156.52 billion), the current month's performance showed a 159.87% rise in total transactions.
Additionally, the total value of domestic investor-executed deals surpassed foreign investor-executed transactions by 78%. While overseas inflows and outflows totaled N22.72 billion and N23.02 billion, respectively, domestic inflows and outflows totaled N180.91 billion and N180.11 billion.
The overall domestic transactions climbed by 26.34 percent from N285.76 billion in May to N361.01 billion in June 2023, according to a further review of all transactions carried out between the current and previous month (May 2023) by Leadership.
Similar to this, between May 2023 and June 2023, total foreign transactions climbed dramatically by 23.09%, from N37.16 billion (about $79.88 million) to N45.74 billion (around $60.49 million).
Domestic transactions fell by 45.30% during a 16-year span, from N3.556 trillion in 2007 to N1.945 trillion in 2022, and foreign transactions similarly fell by 38.47%, from N616 billion to N379 billion. In 2022, total domestic transactions made up around 84 percent of all transactions, while total overseas transactions made up about 16 percent of all transactions.
7 companies suspended from the NGX
Legit.ng earlier reported that The Nigerian Exchange Group (NGX) penalized seven entities for failing to follow the Exchange's rules.
The trading of shares and movement of share prices will be stopped for the following companies: Ardova Plc, Presco, C and I Leasing, Royal Exchange, International Energy Insurance, Pharma Deko, and Afromedia.
Source: Legit.ng
