Nigeria’s NGX sees 90.6% fall in TFI

Foreign interest in Nigeria’s equities market has significantly declined over the past decade due to forex illiquidity, high inflation, and a challenging macroeconomic environment. According to the Nigerian Exchange Limited (NGX), total foreign inflow to equities has dropped by 90.6% in the last 10 years, reaching only N4.6 billion as of March 2023, compared to N43 billion in 2013. On the other hand, domestic transactions have increased by 93.7%, reaching N137 billion in the same period.

Stakeholders are concerned about this prolonged apathy from foreign investors and emphasise the need for comprehensive policies that align with monetary, fiscal, trade, and investment goals to revive interest in the Nigerian stock market. Amaechi Egbo, an independent investor, believes that clear economic policies are essential to attract foreign investors back to the market.

Forex illiquidity has been a major issue affecting investor confidence in the country. The Naira’s depreciation has led foreign portfolio investors (FPIs) to avoid the Nigerian market despite ongoing economic reforms. To address this, Dr. Muda Yusuf, Director/Chief Executive Officer of the Centre for the Promotion of Private Enterprise (CPPE), recommends the implementation of a sustainable intervention framework by monetary authorities to stabilise the foreign exchange market’s volatility.

Yusuf highlights the backlog of unmet forex demand as a significant challenge, causing acute illiquidity. While the forex market has been liberalised, there is still a need for careful management to maintain investor confidence and prevent speculative activities. The Central Bank of Nigeria (CBN) must exercise better oversight on forex demands to protect the market from illicit capital outflows and speculative assaults. Increasing CBN intervention in the forex market can help reduce volatility and attract more foreign investment.

Nigerian authorities must address the forex illiquidity, implement clear and comprehensive economic policies, and provide a sustainable intervention framework to attract foreign investors and stimulate growth in the equity market.