Foreign Investment Outflow Hits N20.19bn in January, Threatening Market Stability

In January 2025, Nigeria’s stock market faced a significant challenge with a net foreign investment outflow of N20.19 billion, signaling potential liquidity issues. According to data from the Nigerian Exchange Limited (NGX), foreign investment outflow surged by 13.2%, reaching N45.85 billion, while foreign inflows dropped slightly by 2.3% to N25.66 billion. This marks a stark contrast compared to January 2024, when foreign inflows stood at just N15.78 billion, exacerbating concerns about the stability of the Naira and external reserves.

The market’s foreign inflows saw a decline from N26.26 billion in December 2024, and the rise in foreign outflow from N40.49 billion in December signals ongoing investor caution. This shift has added pressure to Nigeria’s currency, as foreign investors are likely to sell the Naira to repatriate funds, further straining the exchange rate. As of the end of January 2025, total transactions in the market decreased by nearly 10%, highlighting a broader decline in investor activity compared to the previous month.

A breakdown of transactions for January reveals that domestic investors were the primary drivers of market activity, outpacing foreign investors by approximately 76%. While domestic transactions fell by 11.71%, the value of foreign transactions increased slightly by 7.13%. However, domestic retail investors saw a significant boost in activity, with transactions rising by 33.10%, whereas institutional investors experienced a notable 33.95% drop.

The overall decrease in market transactions for January 2025 compared to the previous year underscores the ongoing challenges facing the Nigerian stock market. The shift in foreign investment patterns is a worrying sign, with experts suggesting that unless market conditions improve, the outflow trend could continue, posing risks to the broader economy.

SOURCE: VANGUARD