Foreign investment in Nigeria equities hits highest level since 2020
Foreign portfolio investments (FPI) in Nigerian equities have surged to their highest levels since the COVID-19 pandemic, reaching $284 million in the first nine months of 2024. This represents a 19% increase from the $239.2 million recorded during the same period in 2023, according to the Capital Importation Data for Q3 2024 from the National Bureau of Statistics (NBS).
This growth reflects the strongest foreign interest in Nigerian equities since 2020, when FPI amounted to approximately $737 million in the first nine months. In contrast, FPI dropped to $168.5 million in 9M 2021, fell further to $51.7 million in 9M 2022, before recovering to $239.2 million in 9M 2023. The third quarter of 2024 saw $84.7 million in FPI, marking the highest level of foreign investment in Nigerian equities for a Q3 since 2019.
Before the pandemic, Nigerian equities attracted significant foreign capital, with inflows reaching $1.89 billion in 2019 and peaking at $2.36 billion in 2018. The first quarter of 2020, prior to the pandemic-induced lockdown, saw $639 million in FPI, but the market experienced a sharp downturn, with FPI plummeting to just $53.2 million in Q2 2020.
The FPI of $84.7 million in Q3 2024 marks an impressive 912% year-on-year increase from $8.4 million in Q3 2023, although it represents a 43.5% decline from the $149.9 million recorded in Q2 2024, indicating some short-term volatility in foreign investment.
Data from the Nigerian Exchange (NGX) further supports the NBS findings. In the first nine months of 2024, foreign participation in the NGX reached N696.9 billion, a 170% increase from N258 billion recorded in the same period in 2023.
The Foreign Portfolio Participation report indicated that foreign involvement in the NGX rose to nearly 18% in the first nine months of 2024, up from 9.5% in 2023. However, this surge in foreign participation has turned the NGX into a magnet for speculative “hot money”, as investors are attracted by the potential for high returns.
In 2024, there was a foreign inflow of N311 billion into the NGX, while outflows amounted to N386 billion, adding to Nigeria’s growing reputation as a hub for speculative investment.
Foreign portfolio investments have become a significant component of Nigeria’s overall capital inflows, accounting for approximately 61% of total capital importation in the first nine months of 2024. A large portion of these investments, $3.43 billion of the $4.38 billion in FPI, has been directed towards short-term money market instruments.
Despite the country’s highest inflation rate since 1996 and a record 27.5% benchmark interest rate, foreign interest in Nigerian equities remains robust. This is largely due to improvements in the country’s foreign exchange system, which now provides greater flexibility, enabling investors to easily invest in Nigerian stocks and repatriate their USD returns without the previous restrictions.
The Nigerian stock market has also delivered attractive returns in 2024, with the NGX achieving a year-to-date return of 31.34%, although this underperforms both the inflation rate and the returns seen in 2023. Stocks such as Seplat, listed on both the Nigerian and London Stock Exchanges, have surged by 147% year-to-date. Airtel Africa, also dual-listed, has recorded a 14% return, while Oando Plc, listed on the Johannesburg Stock Exchange, has posted a remarkable 499% return for the year.
These strong returns, combined with a more stable foreign exchange system, have made Nigerian equities an increasingly attractive investment opportunity for foreign investors seeking to capitalise on the country’s evolving economic landscape.
Source:Businessday
