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Foreign Outflow Slides N2.66bn

Foreign outflow on the platform of Nigeria’s bourse shows marginal improvement of N2.66 billion as domestic investment gained 26.33 per cent ni April, 2015

Joy Onyemaechi

The Foreign Portfolio Investment (FPI) report released recently by the Nigerian Stock Exchange (NSE) for the month of April 2015 shows that foreign outflow for the month totaled N54.62 billion. This outflow value is 5.06 per cent lower than the figure for March. It is also 39.03 per cent greater than what the value was in February and 2.6 per cent lower than its value in January.

In January, the total foreign outflow was N51.08 billion increased by N30.55 billion to leave the February outflow at N81.6 billion 59.8 per cent change inflow. An improvement by the same proportion left March outflow at N52.41 billion. The total foreign outflow for 2015 Year to Date stands at N234.84 billion.

Going further, domestic investment for the Month of April rounded up at N102.91 billion. This was N21.45 billion greater than the N81.46 billion domestic investment value in March. A greater improvement of N52.37 billion when compared to N50.54 billion investments in February and N12.3 billion as compared to the N90.61 billion domestic investment made in January 2015. Total domestic investment for the first four months was N325.52 billion which outweighs total foreign inflows into Nigeria by N120.79 billion.

N54.20 billion worth investment came into Nigeria in April N4.45 billion greater than the outflow from the country. The result for April was more encouraging than what it was in March as foreign inflows gained N4.05 billion compared to N2.20 billion that was lost between February and March. When compared to N52.35 billion that came into the country in February and N48.03 billion inflows recorded in January.

The month of April had more inflows of N1.85 and N6.17 billion respectively. Even with the improvement recorded in April, the value of inflows in April 2015 was still N14.15 billion less than the N68.35 billion inflows that was recorded in April 2014. Total investment into the shores of the country for the first four months was N204.73 billion.

Further look at the report revealed that total transaction in terms of investment for the first four months of this of this year was N765.09 billion with 57.45 per cent being foreign transaction while the remaining 42.55 per cent covers domestic transaction. A further breakdown shows that in January total investment stood at N189.72 billion of which 52.24 and 47.76 percent were foreign and domestic transactions respectively. In February transactions dropped slightly to N184.49 billion with domestic transaction and foreign transactions taking 72.61 and 27.37 per cent respectively. In March although foreign transaction still having a better share of the investment than domestic investment at 55.73 per cent to 44.27 per cent it was still better than the proportion between the two in February.

In comparison to the same in 2014, total FPI transactions decreased by 15.47 per cent whilst the total domestic transaction increased by 51.94 per cent. Foreign Portfolio inflows (FPI) outpaced outflows which was consistent with the same period in 2014. Overall, there was an 8.47 per cent increase in total transactions when compared to the same period in 2014. Total domestic transaction increased by 10.10 per cent from January to April 2015. The institutional composition of the domestic market which was about 33.69 per cent at the end of January increased to 49.41 per cent at the end of April whilst retail composition decreased from 66.31 per cent to 50.59 per cent in the same period.

Historically, total FPI transactions of N616 billion which accounted for 14.8 per cent of total transactions in 2007 increased over the years to N1539 billion representing 57.5 per cent of total transaction in 2014 which is an increase of 42.7 per cent over a seven year period. Domestic transaction on the other hand started atbN3,556 billion representing 85.2 per cent in 2007 but decreased significantly to N1,137 representing 42.5 per cent of total transactions in 2014 which is a sharp decline of 42.7 percent in 7 years. Between 2007 and 2010, domestic investment outperformed foreign investment but between 2012 to date foreign transactions have taken the lead against domestic investment.

The FPO includes transactions or liquidation of portfolio investment through the stock market while the Foreign Portfolio outflow includes purchase transactions on the Nigerian Stock Exchange equities only. The movement of the nation’s bourse is attributed to the high investment outflow to continue profit taking that arose from the uncertainties of the 2015 elections outcome and the immense pressure on the naira. The fall in the price of oil which is Nigeria’s major export has also continuously led to continuous depreciation of the local currency.

Although the FPO has reduced drastically, it’s still competing with the level of inflows into the country which cancels out whatever comes into the country. This leaves the nation as if no investment was originally made. Experts are of the view that improvement would be witnessed now that the new president has emerged as the economic system would be more now. Also with policies that have been put in place by the Central Bank of Nigeria to check the level of investment moved out of the country, the foreign outflow as well as the domestic investment would continue to improve as 2015 grows older as investors would have no choice but to invest locally instead of the normal flight to other countries. A lot still needs to be done to boost the Foreign Investment inflow. This can be achieved if measures which would strengthen the confidence of the investors in the economy would be carried out.

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