Foreign Portfolio Outflows Surge 251% in Q1 2025 Amid Economic Reforms and Global Tensions

In the first quarter of 2025, foreign portfolio outflows from Nigeria’s equities market surged to N420.37 billion, reflecting a significant 251% year-on-year increase compared to the same period in 2024. This spike comes at a time when the country is implementing key economic reforms, particularly in the foreign exchange market, in a bid to attract foreign capital. However, heightened global macroeconomic uncertainties and domestic economic volatility have contributed to investor apprehension, making it a turbulent period for the Nigerian market.

The surge in foreign outflows was accompanied by a rise in foreign inflows, which saw a 322% increase, reaching N393.68 billion in Q1 2025. Despite this growth, the quarter ended with a net capital deficit of N26.69 billion, underscoring ongoing concerns about the sustainability of foreign investment. In March 2025, foreign transactions spiked to N699.89 billion, driven by block trades—a type of transaction often executed by institutional investors. However, a near balance between inflows and outflows in March indicates short-term positioning rather than long-term commitment to the market.

Domestic investor participation saw a decline in March, despite the rally in foreign interest. Domestic transactions fell by 10.98%, with retail and institutional investors alike reducing their market exposure. This shift marks a contrast to January, when domestic participation was much higher. While domestic investors still make up the majority of the market, their share has decreased significantly, from 86.23% in Q1 2024 to 63.53% in Q1 2025, reflecting an increasing sensitivity to external investor behavior.

In terms of overall market activity, March 2025 marked the first time in the year that total transaction volumes exceeded N1 trillion, driven largely by foreign institutional participation. The month’s transaction value reached N1.115 trillion, more than double the amount seen in February. This significant increase reflects the growing influence of foreign investors, especially in block trades, despite the domestic market’s downturn.

Looking ahead, the outlook for Nigeria’s financial markets remains uncertain. While foreign transactions in Q1 2025 rose sharply, questions remain about the sustainability of these flows given Nigeria’s volatile macroeconomic conditions, including inflation, exchange rate fluctuations, and ongoing fiscal reforms. The effectiveness of the Central Bank of Nigeria’s monetary policies and the stabilization of the naira will be critical in determining whether the country can retain foreign investor confidence or if the volatility witnessed in Q1 was merely a temporary phenomenon.

Source: Nairametrics