The Nigerian Exchange Limited (NGX) experienced a notable downturn in trading activity during February 2025, with total transactions declining by 16.07% to N509.47 billion compared to N607.05 billion in January. This contraction was primarily attributed to a substantial withdrawal of foreign investors, whose transactions plummeted by 40.36%, shrinking from N71.51 billion in January to N42.65 billion in February. The decline in foreign participation was evident in both inflows and outflows, with foreign inflows decreasing by 29.67% to N18.05 billion and outflows falling by 46.33% to N24.60 billion. This reduced foreign investors’ overall share of trading to a mere 8.37% in February, down from 11.78% in January, further solidifying the dominance of domestic investors in the Nigerian equities market.
While domestic investors continued to dominate the NGX, their trading volume also experienced a decline, albeit less pronounced than that of foreign investors. Domestic transactions decreased by 12.83%, falling from N535.54 billion in January to N466.82 billion in February. This decline was observed across both retail and institutional investors. Retail investors’ transactions dropped by 19.76% to N214.51 billion, while institutional investors’ transactions decreased by 5.92% to N252.31 billion. The overall decline in trading activity, despite the continued prevalence of domestic investors, underscores the impact of foreign investor sentiment on market dynamics.
The dwindling foreign participation raises concerns about investor confidence in the Nigerian capital market. Factors contributing to this decline could include uncertainties surrounding the Nigerian economy, currency fluctuations, and potentially, global economic headwinds. The significant drop in foreign inflows suggests a hesitancy among international investors to commit capital to the Nigerian market, while the reduced outflows could indicate a cautious approach to divesting existing holdings.
Analyzing the year-to-date performance for the first two months of 2025 reveals a total transaction value of N1.12 trillion. Domestic investors accounted for the lion’s share of this activity, contributing N1 trillion, or 89.78%, while foreign investors contributed a comparatively smaller N114.16 billion, representing 10.22%. Although total transactions for the first two months of 2025 showed a 10.62% increase compared to the N1.01 trillion recorded during the same period in 2024, the shrinking share of foreign participation, from 11.78% in 2024 to 10.22% in 2025, remains a point of concern. This suggests that while overall market activity has grown, the growth is primarily driven by domestic investors, with foreign investors seemingly adopting a more cautious stance.
A broader historical perspective reveals a long-term trend of increasing domestic dominance in the Nigerian equities market. Data spanning 18 years, from 2007 to 2024, shows a 33.15% growth in domestic participation, rising from N3.56 trillion to N4.73 trillion. During the same period, foreign transactions also increased, albeit at a slightly higher rate of 38.31%, growing from N616 billion to N852 billion. Despite this growth in foreign transactions, their overall share in the market has remained relatively low, averaging around 15% in 2024, compared to the dominant 85% held by domestic investors. This long-term trend highlights the enduring strength of domestic investment in the Nigerian equities market, while also underscoring the challenges in attracting and retaining significant foreign investment.
The withdrawal of N455.62 billion by foreign investors from the Nigerian stock market in 2024 further reinforces the concerns surrounding investor confidence. This substantial outflow, exceeding the total inflows for the year, points to a significant net divestment by foreign investors. Despite efforts by the Central Bank of Nigeria to stabilize the naira, foreign investors appear to remain wary of the Nigerian market. This emphasizes the need for further measures to bolster investor confidence, attract foreign capital, and promote a more balanced participation in the Nigerian equities market. Addressing issues such as currency volatility, regulatory clarity, and macroeconomic stability are crucial steps towards achieving this goal and fostering a more robust and resilient capital market.
