The Nigerian equities market witnessed a significant surge in foreign investment activity during the first quarter of 2025, marked by a dramatic increase in both inflows and outflows, ultimately resulting in a net outflow of N420.37 billion. This represents a substantial 251% increase in capital flight compared to the N119.81 billion recorded in the same period of 2024. March 2025 was particularly volatile, with total foreign transactions skyrocketing to N699.89 billion, a stark contrast to the N42.65 billion and N71.51 billion recorded in February and January, respectively. This surge propelled foreign investors’ share of the total trade value to 62.74% in March, up from a mere 8.37% in February and 11.78% in January. The nearly equal split between inflows and outflows in March (N349.97 billion and N349.92 billion, respectively) suggests a prevalence of short-term speculative trading rather than a commitment to long-term investment.
The volatile nature of foreign participation is evident when comparing the March figures to those of the preceding months. February saw relatively modest inflows and outflows of N18.05 billion and N24.60 billion, while January registered N25.66 billion in inflows and N45.85 billion in outflows. While total foreign inflows for Q1 2025 reached N393.68 billion, a significant 322% increase from Q1 2024, the quarter ultimately closed with a net deficit of N26.69 billion. This negative balance underscores lingering investor anxieties regarding Nigeria’s economic stability and the consistency of government policies. The substantial outflows despite increased inflows highlight a cautious approach by foreign investors, potentially driven by concerns over currency fluctuations and policy uncertainties.
Interestingly, the surge in foreign activity coincided with a decline in domestic participation. Total domestic transactions decreased by 10.98% in March to N415.62 billion, down from N466.82 billion in February and N535.54 billion in January. Both retail and institutional investors scaled back their activities, with retail trades dropping to N197.12 billion from N214.51 billion and institutional investments decreasing to N218.50 billion from N252.31 billion. While total domestic trades for 2025 reached N1.417 trillion, exceeding the N1.335 trillion in Q1 2024, the growth momentum has slowed significantly. Domestic investors now represent 63.53% of total market activity, a notable decline from their 86.23% share a year earlier, highlighting the shifting dynamics in the Nigerian equities market.
The overall market activity in March 2025 reached a record high, exceeding N1 trillion for the first time in the year. At N1.115 trillion, the March value more than doubled February’s N509.47 billion and surpassed January’s N607.05 billion. This represents a substantial 107.14% year-on-year increase from the N538.54 billion recorded in March 2024. Converting to dollar terms, using the March NAFEM rate of N1,536.82/$1, the total trade volume equates to $725.86 million, a significant jump from February’s $341.36 million. This surge in trading activity underscores the increased interest in the Nigerian market, albeit driven by significant foreign investor volatility.
Historically, domestic investors have held a dominant position in the Nigerian equities market. From 2007 to 2024, domestic transactions grew from N3.556 trillion to N4.735 trillion, while foreign transactions increased from N616 billion to N852 billion. However, the March 2025 figures signal a potential shift in this long-standing trend, with foreign investor activity outpacing domestic participation for the first time in over a year. The total transactions for Q1 2025 reached N2.232 trillion, with foreign trades accounting for N814.05 billion (36.47%) and domestic trades at N1.417 trillion (63.53%). This represents a stark contrast to Q1 2024, where foreign investors contributed only 13.77% and domestic trades comprised the vast majority (86.23%). This shift raises questions about the long-term implications for market stability and the influence of external factors on the Nigerian economy.
The surge in foreign trading activity, particularly the substantial outflows, occurs against a backdrop of ongoing economic reforms and exchange rate instability. Since mid-2023, the Central Bank of Nigeria has implemented FX liberalization measures and tightened monetary policy to attract foreign capital and curb inflation. However, the naira’s depreciation, from N1,492.49/$1 in February to N1,536.82/$1 in March, coupled with persistent inflationary pressures, has dampened investor confidence. Headline inflation rose to 24.23% in March 2025, reversing the slight dip to 23.18% in February following the rebasing of the Consumer Price Index. Rising food and transport costs, influenced by exchange rate fluctuations and increased logistics expenses, contribute to the inflationary pressures. Some investors might be capitalizing on brief periods of naira strength, entering the market during currency appreciation and exiting when depreciation resumes. Others remain cautious about the long-term sustainability of Nigeria’s fiscal and monetary reforms, contributing to the volatile market dynamics. While the influx of foreign funds, including through block trades, suggests renewed interest in Nigerian assets, it also raises concerns about speculative activity driven by short-term currency movements rather than genuine long-term investment commitments. The overall picture suggests a complex interplay of factors influencing the Nigerian equities market, with the increased foreign participation adding a layer of volatility and uncertainty to the future trajectory of the market.
