Foreign Investors Withdraw N420bn from Nigerian Stock Market Amid Economic Instability
In the first quarter of 2025, foreign investors pulled out a massive N420.37 billion from the Nigerian Stock Exchange (NGX), marking a 251% increase compared to the N119.81 billion in Q1 2024. This outflow highlights growing investor anxiety, driven by ongoing economic reforms and persistent instability in the foreign exchange market. The withdrawal is the largest recorded in recent memory, signaling heightened uncertainty and risk aversion in the market.
Despite efforts by the Nigerian government to attract foreign capital through measures such as foreign exchange (FX) liberalization and interest rate hikes, investor sentiment remained volatile. A notable spike in foreign transactions occurred in March 2025, when foreign trades dominated the market for the first time in over a year. During this period, foreign trades surged to N699.89 billion, up 1,541% from February, largely driven by block trades. These large transactions indicated speculative activity rather than long-term investment commitments.
The Nigerian Stock Exchange’s Domestic and Foreign Portfolio Investment Report for March 2025 showed that foreign investors accounted for 62.74% of total market turnover, a sharp increase from just 8.37% in February. Foreign inflows and outflows were nearly balanced, totaling N349.97 billion and N349.92 billion, respectively. This round-trip flow of funds underscores the speculative nature of recent foreign participation, with liquidity-driven transactions becoming a dominant feature.
In total, foreign transactions in Q1 2025 reached N814.05 billion, a staggering 282% increase from the previous year. Foreign inflows saw a 322% rise to N393.68 billion, but the market ended the quarter with a net deficit of N26.69 billion. This reflects sustained investor wariness despite higher foreign activity. In contrast, domestic participation in the market weakened, with total domestic transactions in March falling by 10.98% from February.
While the surge in foreign activity in March suggests renewed interest, analysts caution that it may be driven by short-term speculative moves tied to FX arbitrage opportunities rather than long-term investor confidence. Experts point out that Nigeria’s macroeconomic challenges, including rising inflation and currency depreciation, continue to pose risks for sustained foreign inflows. Analysts argue that policy clarity and stability in the FX market will be crucial for rebuilding investor confidence in the long run.
Source: The Sun