Nigeria’s Foreign Portfolio Investments, FPIs, has risen to N321.04 billion in the third quarter of 2022, Q3’22, about 11.8 per cent higher than N287.2 billion recorded in the corresponding period of 2021, Q3’21.
FPI represents value of foreign investments in the Nigerian stock market.
Though usually called ‘hot money’ because of the speed of entry and exit, analysts believe the higher balance in the FPI position is attributable to the inability of the investors to move out their money due to unavailability of foreign exchange.
Meanwhile, the value of retail investments in the stock market continued to rise hitting N556.78 billion in Q3’22, about 27.5 per cent increase as against N436.53 billion in corresponding period of 2021.
Analysts attributed this increase to improved investors’ confidence occasioned by several changes that have taken place in the market environment this year.
“Through regulatory interventions by Securities and Exchange Commission, SEC and Central Bank of Nigeria , CBN, new rules have been made to regulate several unregulated practices in the capital market, especially margin trading which mismanagement caused the credit boom that precipitated the dangerous asset bubble have led to increased investor confidence”, analysts noted.
Vanguard’s findings from the Nigerian Exchange Limited, NGX, shows that foreign investors’ contribution to the entire value of transactions at N1.97 trillion in Q3’22 was 16.3 per cent while retail investors’ contribution stood at 28.3 per cent.
Commenting on the FPI position, analyst and CEO, APT Securities & Funds Limited, Mallam Garba Kurfi, said: “We are not surprised at the increase in the Foreign Portfolio Investments, which was due to lack of Foreign Exchange that prevented the foreign investors from repatriating their funds; they rather buy back stocks and dividend received which cannot be taken away. They rather buy more stocks. There are very few that decided to bring additional funds in order to take advantage of the low price of the stocks.”
On projection for the Q4’22, he said: “As a result of devaluation of Naira we are expecting more inflow to take advantage of the low price stocks as most of the blue chips are trading at 53 weeks low.”
Commenting as well, an investment banker/Chartered Stockbroker, Tajudeen Olayinka, said: “The urge to move capital around the world for greater portfolio return (capital mobility) and the effect of inflation on nominal values could be responsible for nominal increase in the value of investments by foreign portfolio investors. However, the fact that economy and market did not really feel the impact of such level of capital flow, means that rising inflation and exchange rate movement were largely responsible for the level of increase we saw in the nine months of 2022.
“Since the figure for retail investors is also a nominal value, it follows clearly that inflation and reinvestment of dividends could have been responsible for the increase in nominal value of investment by that class of investors.”