NGX: Portfolio investment in equities surged to N5.59trn in 2024

By Chinwendu Obienyi

The Nigerian Exchange Limited (NGX) experienced a significant surge in equity transactions by domestic and foreign portfolio investors in 2024, reaching N5.59 trillion, a Cowry Research weekly report revealed at the weekend.

The figure represents a 56.2 per cent year-on-year (y/y) increase reaching from N3.58 trillion a year ago. Similarly, domestic investors remained the dominant force in the market, accounting for 84.75 per cent (N4.73 trillion), while foreign investors contributed 15.25 per cent (N852.03 billion).

This marked an improvement in foreign participation compared to 2023 when foreign transactions stood at just 11.48 per cent of total market activity.

The year had begun on a strong note in January, with total transactions amounting to N651.52 billion while investors accounted for 91.85 per cent (N598.41 billion), while foreign investors contributed 8.15 per cent (N53.11 billion).

Fueled by strong corporate earnings, positive sentiment around economic reforms, and increased capital inflows, the NGX All-Share Index rose up by 35.3 per cent during the month. However, in February, total market transactions declined to N357.88 billion, as profit-taking and rising inflation (31.7 per cent) dampened investor sentiment.

But, foreign transactions increased to 18.39 per cent (N65.81 billion), while domestic transactions dropped to 81.61 per cent (N292.07 billion). The naira depreciated further to N1,580.5/$1, reducing foreign confidence in the market.

Market confidence rebounded in March, with total transactions increasing to N538.54 billion. Foreign investors accounted for 17.50 per cent (N94.26 billion), while domestic transactions stood at 82.50 per cent (N444.28 billion). The slight stabilisation of the naira at N1,421/$1, coupled with a GDP growth rate of 2.98 per cent in the first quarter (Q1) of 2024, boosted investor sentiment.

The month of April saw a decline in total transactions to N346.23 billion, despite foreign participation increasing to 34.90 per cent (N120.83 billion). Domestic transactions dropped to 65.10 per cent (N225.40 billion). The rise in foreign inflows followed favourable policy announcements and investor positioning ahead of the second quarter (Q2) earnings season, while inflation edged up slightly to 33.69 per cent.

However, the month of May, June, July and August saw total transactions on the bourse increasing amid the Monetary Policy Committee (MPC) adjusting the Monetary Policy Rate (MPR) to 26.25 per cent to curb inflationary pressures

In September, the market recorded N493.01 billion in transactions, with foreign participation declining further to 8.40 per cent (N41.41 billion) and domestic investors accounting for 91.60 per cent (N451.60 billion) owing to naira volatility which discouraged foreign inflows, while strong domestic confidence sustained market activity.

The Nigerian Treasury Bills (NT-Bills) market saw a bearish performance, with declining prices leading to an increase in yields by 0.71 per cent month-on-month to 21.92 per cent, attracting capital away from equities. The month of October, November and December saw transactions increasing further amid MPR raise, strong domestic institutional participation and the issuance of the $2.2 issuance of $2.2 billion in Eurobonds helped bolster foreign exchange reserves and contributed to a rise in foreign portfolio investment.

Reacting to the report, market operators, while expressing their confidence in the growth of the market, noted that its future growth will depend on sustained policy reforms, exchange rate stability, and overall economic growth.

The Chief Executive Officer, Crane Securities, Mike Eze said, “This upward trend highlights growing confidence in the Nigerian equities market, with local investors playing a crucial role in sustaining market liquidity and activity. However, foreign investor participation remains relatively low, signaling global economic uncertainties and cautious investment approaches”.

For their part, analysts at Cowry Research, said, “Over the last 18 years, domestic transactions have grown by 33.15 per cent, while foreign transactions have increased by 38.31 per cent. Looking ahead, sustained policy reforms, exchange rate stability, and economic growth will be crucial in maintaining this momentum.

Enhancing investor confidence, particularly among foreign participants, will be key to fostering long-term market growth in 2025. Additionally, global economic conditions and local regulatory frameworks will continue to shape investment decisions in the year 2025”.