Foreign investors pulled out N576.09 billion from the Nigerian Exchange (NGX) in the first half of 2025, representing an 85% increase compared to the same period in 2024. This significant capital flight comes at a time when small and retail investors are already under pressure due to inflation and economic uncertainty.
While total foreign inflows stood at N559.25 billion, the outflows resulted in a net negative foreign position of N16.84 billion over the six-month period. According to the NGX's June 2025 Domestic and Foreign Portfolio Investment Report, foreign trading volumes more than doubled year-on-year, hitting N1.14 trillion, up from N540.48 billion in H1 2024.
Analysts attribute the surge in foreign exits to global uncertainty triggered by U.S. trade policies, as well as Nigeria's high Treasury bill yields, which encouraged short-term investment and quick exits.
On the domestic front, investors traded N3.06 trillion worth of equities between January and June 2025, accounting for nearly 73% of all market activity. Institutional investors—such as pension funds and asset managers—dominated with N1.59 trillion, while retail investors, including many small business owners and individual traders, contributed N1.47 trillion.
Although domestic participation appears balanced on paper, a closer look reveals that institutional investors have begun to widen the gap. In January and February, retail and institutional activity were nearly even, but from March onward, institutions took the lead, culminating in a significant margin in June: N364.71 billion versus N274.63 billion.
This growing dominance of institutional capital raises concerns for small investors and SMEs relying on the market for growth capital or wealth building. Retail participation peaked in May at N337.46 billion before dropping by over 18% in June. Rising inflation—hovering above 22%—has squeezed household income, leaving less room for investment in stocks or mutual funds.
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March was the most active month on the NGX, with total transactions reaching N1.29 trillion, largely driven by a surge in foreign inflows. However, the momentum didn't last. In April, trades fell sharply to N487.39 billion, as the U.S. government announced a 14% tariff on Nigerian imports. Foreign investors responded by pulling out N70.20 billion, while retail activity also dipped.
By June, foreign inflows recovered slightly to N72.82 billion, and outflows eased to N66.49 billion, leaving a small net positive of N6.33 billion. A modest rebound in the naira—from N1,586.15/$1 in May to N1,529.71/$1 in June—may have helped stabilize foreign interest. Still, concerns around foreign exchange liquidity and policy direction remain top reasons for investor caution.
Experts say the trend reflects deeper structural issues that affect small business participation in the capital market. Financial analyst Johnson Chukwu noted that foreign investors are shifting focus to safer, high-yield money market instruments such as Treasury bills and OMO bills. Equity investments, which are more relevant for small businesses seeking to grow through public markets, are attracting far less interest.
According to Chukwu, just $117 million of the $5.2 billion in foreign portfolio investment in Q1 2025 went into equities—the rest went to fixed-income instruments. This underlines the limited access to affordable capital for Nigerian SMEs in the current environment.
Olatunde Amolegbe, CEO of Arthur Stevens Asset Management, explained that foreign portfolio investors are typically short-term traders. While the exit of funds may seem alarming, he believes it's part of a normal investment cycle. "Money comes in, profits are made, and money goes out," he said. He added that fixed income often serves as the entry point for foreign funds before transitioning to equities.
Amolegbe also noted that the NGX has performed well this year, returning about 40% year-to-date—though many small investors haven't benefitted due to limited participation.
Research analyst Dayo Adenubi emphasized that foreign investors often rely on complex data models and are focused on short-term gains. Their fast-paced trading boosts liquidity but can leave smaller market players vulnerable to volatility.
For SMEs and retail investors, the current dynamics highlight the need for financial education, incentives for long-term investing, and improved access to safe, transparent investment platforms. As institutional investors continue to deepen their presence, market regulators and policymakers may need to do more to support the retail segment—ensuring small businesses and everyday Nigerians are not left behind in the capital market boom.
