October 16, 2021

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Inflation, FX scarcity trigger N140bn outflow from NGX in 8 months

By Chinwendu Obienyi

 

With a weakened macroeconomic indices as well as worsening foreign exchange crisis, latest investigations have shown that foreign investors withdrew a total of N139.39 billion from the Nigeria’s stock exchange between January and August 2021.

According to the Domestic & Foreign Portfolio Investment report of the Nigerian Exchange Limited (NGX) for August 2021, foreign inflows dropped to N123.46 billion from N161.31 billion in 2020 year-to-date (ytd) while foreign outflows stood at N139.39 billion from N308.89 billion in 2020.

The report indicated that as at August 31, 2021, total transactions at the nation’s bourse fell marginally by 0.39 per cent from N89.77 billion (about $218.20 million) in July 2021 to N89.42 billion (about $217.53 million) in August 2021. 

The performance of the current month when compared to August 2020 (N94.45 billion) figures revealed that total transactions decreased by 5.33 per cent.

Also, in August 2021, the total value of transactions executed by domestic investors outperformed transactions executed by foreign investors by 44 per cent, as domestic inflows for the month under review stood at N33.82 billion while outflows stood at N30.24 billion. In the same vein foreign inflows and outflows stood at N10.72 billion and N14.64 billion respectively.

Further analysis of total transactions executed between the current and prior month (July 2021) revealed that domestic transactions fell by 13.71 per cent from N74.24 billion in July to N64.06 billion in August 2021.

However, total foreign transactions increased by 63.30 per cent from N15.53 billion (about $37.75 million) to N25.36 billion (about $61.69 million) between July 2021 and August 2021.

The report also indicated that Institutional investors outperformed Retail investors by 0.44 per cent as the comparison of domestic transactions in the current and prior months (July 2021) revealed that retail transactions dropped by 15.16 per cent from N37.59 billion in July 2021 to N31.89 billion in August 2021. Similarly, the institutional composition of the domestic market decreased by 12.22 per cent from N36.65 billion in July 2021 to N32.17 billion in August 2021.

Daily Sun investigations revealed that in 2018, N642.65 billion in foreign portfolio investment outflow was recorded, while foreign investors withdrew N523.42 billion and N481.93 billion during the corresponding period in 2019 and 2020.

Piqued by the huge capital outflow from the equities market in 8 months, operators at the weekend predicted a gloomy outlook for the market and economy. They argued that the macroeconomic indices have been overwhelmingly weak, noting that the increase in foreign transactions was due to the knock-on impact of IMF’s SDR allocation and the recently concluded Eurobond issuance on FPIs appetite for stocks.

Speaking during the Sunrise programme on Channels Television, Former Head, Banking and Finance Department at the Nasarawa State University Keffi, Professor Uche Uwaleke, said the GDP figure appears to be disconnected from reality as Nigeria’s growth figures appear not to be quite an inclusive one.

According to him, “Unless the Federal Government improves the ease of doing business and addresses infrastructural deficits, the level of outflows might continue to increase”.

For their part, analysts at Cordros Capital, said, “Our expectation of yield moderation in the fixed income market bodes well for the equities market over the short to medium term. Similarly, we expect improved participation from FPIs on account of increased dollar liquidity at the I & E window given inflows from IMF’s SDR allocation and the Eurobond issuance. 

Accordingly, we see scope for improved activities from both the domestic and foreign investors over the medium term”.

The post Inflation, FX scarcity trigger N140bn outflow from NGX in 8 months appeared first on The Sun Nigeria.

Source: news