Foreign Portfolio Inflows into the Nigerian Exchange (NGX) – H1 2024 Overview
Inflows and Outflows
In the first half of 2024, foreign portfolio inflows into the Nigerian Exchange (NGX) totaled approximately $161.4 million. This represents a 14% increase from the $141.8 million recorded in the first half of 2023.
The market saw a total foreign inflow of N229.07 billion during this period, compared to N72.02 billion at the end of H1 2023. In Naira terms, this is a remarkable 218% year-on-year increase. However, due to a 64% devaluation of the Naira (from N508/$ in H1 2023 to N1420/$ in H1 2024), the growth in Dollar terms was much more modest.
Despite the inflows, foreign outflows were significantly higher. In H1 2024, foreign outflows reached $219.4 million, marking a 52.5% increase from the $144 million outflow in H1 2023.
Foreign Participation
Foreign participation in the NGX during the first half of 2024 was about $380.74 million (N540.48 billion), which accounted for 20.75% of total market transactions. This is an improvement from H1 2023, when foreign participation was about $285.7 million (N145 billion), representing roughly 10% of the total transactions.
The total transactions on the NGX in H1 2024 amounted to N2.604 trillion (approximately $1.83 billion).
This signifies a 79.5% increase in Naira terms compared to N1.45 trillion in H1 2023. However, in Dollar terms, this reflects a 36% year-on-year decline from $2.86 billion in H1 2023.
Domestic transactions also saw a decline, with a 43% year-on-year drop from $2.57 billion in H1 2023 to $1.45 billion in H1 2024.
In Q2 2024, foreign participation surged by 53%, reaching N327.3 billion (or $230.5 million), up from N213.2 billion (or $152.6 million) in Q1 2024.
May 2024 saw the highest level of foreign participation in the NGX since November 2021, with foreign portfolios contributing 34.97% to the total market activity. In May, total transactions were N355.38 billion, with foreign contributions amounting to N124.28 billion ($83.78 million).
However, in June 2024, foreign participation dropped to 23.18%, with foreign portfolio transactions totaling N82.19 billion ($55.88 million). This represented a slight decrease of 0.23% from May’s total transactions, which amounted to N354.55 billion.
Year-on-year, June 2024 transactions declined by 13%, compared to N406.75 billion in June 2023. Foreign portfolio transactions also fell by 34% from $85.04 million in June 2023.
Commentary
Throughout the first six months of 2024, foreign portfolio outflows consistently exceeded inflows, with the exception of March.
This raises concerns about the role of foreign portfolio investors (FPIs) in contributing to forex liquidity in Nigeria, as they seem to be withdrawing more capital than they are bringing in.
Despite this, the NGX was recognized as the best-performing stock exchange in Africa in H1 2024 and one of the fastest-growing emerging markets.
This strong performance highlights the market’s potential for capital gains and underscores increased foreign investor interest. This increased interest is a positive sign for the banks’ recapitalization efforts.
