Foreign investments in Nigeria’s equities market reached $150 million in the second quarter of 2024 (Q2 2024), a remarkable 204% increase from the $49.4 million recorded in the first quarter (Q1 2024). This growth also represents a massive 1,660% year-on-year increase from $8.5 million in Q2 2023.

According to the Q2 2024 Capital Importation data released by the National Bureau of Statistics (NBS), Foreign Portfolio Investment (FPI) in Nigeria for Q2 stood at $1.4 billion, reflecting a 32% decline from the $2.08 billion in Q1 2024. However, year-on-year, FPI surged by 1,208% from the $107 million recorded in Q2 2023.

Foreign Portfolio Investments Surge in 2024 Despite Decline in Equities
In the first half of 2024 (H1 2024), total foreign portfolio investments in Nigeria amounted to $3.48 billion, showcasing a 360% year-on-year growth from $756.1 million recorded in H1 2023. During this period, foreign portfolio participation in Nigeria’s equities market stood at $199.3 million, a 14% decrease from $230.8 million in H1 2023.

Foreign participation in Nigeria’s equities dropped sharply in Q2 2024, with only $8.5 million compared to the $222 million recorded in Q1. This steep decline points to a shift in investor focus from equities to other financial instruments.

Nigeria’s Money Market Instruments See Unprecedented Foreign Investment

The bulk of foreign portfolio investments in Nigeria during H1 2024 were concentrated in money market instruments, such as treasury bills, OMO bills, and commercial papers. In H1 2024, 77% (or $2.68 billion) of Nigeria’s foreign portfolio investments went into these instruments. In Q2 alone, $1.08 billion was invested in the money market, down from $1.61 billion in Q1.

Year-on-year, foreign participation in Nigeria’s money market instruments skyrocketed 20-fold, growing from $139 million in H1 2023. This growth can be attributed to the high interest rates offered on these instruments. For instance, in H1 2024, the Central Bank of Nigeria (CBN) offered yields of up to 22.5% on some treasury bills, and 22% on OMO bills. In the second half of 2024, these rates increased even further, with OMO bills reaching 27.25% to attract foreign investments.

Corporate Sector Benefits from High-Yielding Debt Instruments

Private companies also tapped into the debt market, offering commercial papers with substantial returns. Firms with solid credit ratings provided commercial papers with discount rates ranging from 25% to 30%.

During H1 2024, approximately $599 million worth of foreign portfolio investments were directed to bonds. The bulk of this, $420.8 million, occurred in Q1. Compared to H1 2023, foreign investments in bonds grew by 55%, as $386 million** had been recorded during the same period the previous year.

Total Capital Importation in H1 2024

Overall, total capital importation into Nigeria in H1 2024 stood at $5.98 billion, marking a 177% year-on-year growth from $2.16 billion in H1 2023. Notably, foreign portfolio investments accounted for 58% of the total capital importation.

Factors Driving Foreign Investment Surge

Matilda Adefalujo, a banking analyst at Meristem Nigeria, attributed some of the investment activities to the banking sector’s recapitalisation, as various primary market activities around banking stocks were noted during the quarter.

Meanwhile, Samuel Oyekanmi, an investment research analyst at Norrenberger, linked the surge in foreign investments to key CBN policies aimed at increasing foreign capital inflows. He highlighted the improved foreign exchange supply, which boosted investor confidence, alongside the high interest rates on money market instruments, positioning Nigeria as an attractive environment for high-yielding investments.

Source: Businessdayng