Foreign inflows into Nigeria's equities market declined sharply by 29.66% in February 2025, dropping to N18.05 billion from N25.66 billion in January.
This downturn contributed to a broader 40.36% fall in total foreign portfolio transactions on the Nigerian Exchange Limited (NGX), which shrank from N71.51 billion to N42.65 billion within the month.
The declining foreign participation underscores waning investor confidence, largely driven by macroeconomic instability and persistent volatility in Nigeria's foreign exchange market.
However, foreign outflows also fell by 46.33%, decreasing from N45.85 billion in January to N24.60 billion in February, indicating a more cautious approach by offshore investors rather than a full-scale exit.
Overall, total transactions on the NGX dropped 16.07% month-on-month, from N607.05 billion ($410.84 million) in January to N509.47 billion ($341.36 million) in February.
Despite this short-term decline, trading volumes remain stronger year-on-year, reflecting a 42.36% increase compared to N357.88 billion recorded in February 2024.
Domestic Investors Tighten Grip on Market
Domestic investors continued to dominate equity trading, accounting for 91.63% (N466.82 billion) of total market transactions in February, up from 88.22% in January.
Within this segment, institutional investors led with N252.31 billion in transactions, while retail investor activity dropped by 19.76%, falling from N267.35 billion to N214.51 billion.
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Cumulatively, total domestic transactions for 2025 stood at N1.002 trillion as of the end of February, surpassing the N890.48 billion recorded in the same period in 2024. Meanwhile, foreign portfolio activity reached N114.16 billion in the first two months of 2025, slightly below the N118.92 billion recorded in early 2024.
Over an 18-year span, domestic participation in Nigeria's stock market has risen by 33.15%, from N3.56 trillion in 2007 to N4.73 trillion in 2024. Foreign investments have also grown by 38.31% over the same period, climbing from N616 billion to N852 billion.
Despite this, domestic investors remain the dominant force, accounting for 85% of total transactions in 2024.
Market Uncertainty and Economic Headwinds
Financial analysts attribute the slump in foreign investment to economic uncertainty and high-interest rates. Charles Sanni, CEO of Cowry Treasurers Limited, noted that foreign investors are cautious due to the naira's volatility and Nigeria's inflationary pressures.
"Inflation has clouded future projections. Many expected Nigeria to attract more investment, but currency instability created hesitation. While NGX performance was solid, foreign investors incurred exchange rate losses," Sanni explained.
He added that persistently high domestic interest rates could further strain corporate profit margins, reducing the appeal of Nigerian equities.
"If interest rates remain elevated, companies will face rising costs of capital, eroding their profitability. Our credit system is weak, and high rates already pose a challenge," he said.
Sanni warned that investor fatigue could set in if economic concerns persist. He urged the government to stabilize inflation, keep the naira around N1,200 per dollar, and ensure transparency in financial reporting to restore confidence in the market.
