The Nigerian Stock Exchange (NSE) lost $15 million (N4.5 billion) of foreign equity investments in 2016 as it missed out on $61.4 (N19 trillion) which investors staked on emerging markets equity in the year, stressing investors’ continued distaste for Nigerian equities despite low prices.
The NSE All Share Index, which monitors the general market movement of all listed company stocks on the Exchange, plummeted 6 per cent in 2016 on the back of a 17 per cent tumble in 2015, the worst decline in three years. Analysts say that the exit of portfolio investors contributed significantly to depressed prices in the securities market of Africa’s biggest economy.
The portfolio investors would have exited earlier, but they left it till 2016 because of the difficulty they had in getting foreign exchange (FX), said an analyst with one of Nigeria’s foremost research firms.
Nigeria started having FX challenges around February 2015 as foreign investors found it difficult to access dollars, constraining them from realising their investments as they desired. This deterred them from committing additional funds to the market; it also prevented scared away many a potential investor.
“They started exiting from 2015 actually but stopped when they had problems getting FX. As people got dollars, they started taking their money away,” the analyst said.
According to the NSE report on “domestic and foreign portfolio participation in equity trading – December 2016”, foreign investors comprised 54 per cent of the value of investments in the NSE as at December, 2015.
The report shows that by December 2016, the holdings of these investors in the equity investments of the NSE had shed up to 9 percentage points as their investment value had declined to $1.6 billion (N518 billion), from $3 billion (N1 rillion) in 2015.
IIF Capital Flows Tracker December 2016, a report of the International Institute of Finance which documents the value of non-resident portfolio flows to emerging markets, said that non-resident emerging market (EM) portfolio inflows for 2016 stood at $28 billion (N8.5 trillion).
The report said that overall, EM equities did better in 2016, with $61.4 billion in net portfolio inflows; EM debt saw net portfolio outflows of $33.8 billion for the year.
“Despite outflows from China, net capital inflows to other EMs were robust at $18 billion in November, only slightly below October’s $21 billion. Net capital inflows to India rose to $8.7 billion, while Turkey, South Africa, Brazil, and Mexico saw lower inflows. Indonesia was the only country in our sample to see net capital outflows (around $0.8 bn) in November,” the report noted.
The NSE report shows that total transactions in the country’s bourse from January to December 2016 decreased significantly by 39.58%, from up to N2 trillion recorded within the same period in 2015 to N1.2 trillion as at the end of 2016.
Domestic transactions also decreased by 28.02% from N880.56 billion to N633.82 within the same period, the report said.
INNOCENT UNAH
