By Chinenye Anuforo and Chinwendu Obienyi
total transactions in the first half of the year in the stock market increased 49.78 per cent from N624.41 billion in 2016 to N935.26 billion in 2017, statistics by the Nigerian Stock Exchange (NSE) have shown.
The data on domestic and foreign portfolio participation in equities trading in June 2017 released last week on the Exchange’s website showed that total transactions increased by 7.13 per cent from N205.61 billion recorded in May 2017 to N220.27 billion in June 2017, while total domestic transactions rose by 7.53 per cent to N110.42 billion recorded in May 2017 to N118.74 in June 2017 on a month-to-month basis.
Foreign transactions also increased by 6.66 per cent from N95.19 billion to N101.53 billion within the same period while monthly foreign inflows outpaced outflows. Foreign inflows, however, decreased by 10.95 per cent from N73.15 billion in May 2017 to N65.93 billion in June 2017 while foreign outflows increased by 38.09 per cent from N22.04 billion in May 2017 to N35.60 billion in June 2017.
In comparison to the first half of 2016, total foreign portfolio investment (FPI) transactions increased by 59.81 per cent from N269.22 billion to N430.23 billion, while the total domestic transactions increased by 42.19 per cent from N355.19 billion to N505.03 billion.
Since 2011, foreign transactions have consistently outperformed domestic transactions as local transactions have significantly decreased by 85.43 per cent from N3556 billion in 2007 to N634 billion in 2016.
But the recent campaign by stock market stakeholders seems to be paying off as domestic investors dominated foreign investors by 7.82 per cent to stage a huge comeback amidst calls for increased local participation in the Nigerian capital market.
Further analysis of data from the Exchange showed that the institutional composition of the domestic market decreased by 17 per cent from N67.95 billion recorded in May to N56.34 billion in June 2017. However, the retail composition increased by 46.92 per cent from N42.47 billion to N62.40 billion within the same period.
This indicates a higher participation by retail investors over their institutional counterparts for the first time this year. The main factors behind the rebound include increased confidence in policy initiatives by the government, which has turned the market to positive territory within the last two months, market watchers have said.
The Chief Executive Officer of Cranes Securities, Mr. Mike Ezeh, had said it was important for domestic investors in the nation’s capital market to leverage the current low prices of stocks quoted on the exchange for future gains, adding that the market was ripe for investment going by the low prices of stocks. He noted that it was obvious that activities will stabilise in the market in no distant time.
He said, “the market still suffers from confidence issues within the domestic sector. We need increased level of domestic participation to improve the volume of trades and to contain the high volatility currently being experienced in the market.” The Chairman, NASD OTC Plc, Mr. Tola Mobolurin, said that if local institutions were expanded, they would generate savings within the country thereby substituting foreign capacity.
According to him, it was desirable for the government to seek how to moderate the destabilising influence of FPIs in the Nigerian capital market by boosting domestic participation in the market.
He said, “we must generate savings within the country to supplement foreign investment. We cannot depend on foreign investment if we want to salvage this country.
“We need to expand local institutional investment capacity and to achieve this, Pension Fund Administrators (PFAs) must play a larger role to do this. Given that the industry is highly fragmented with most operators lacking both human and capital capacity, it is high time the various processes that have been put in place both by regulators and other decision makers in the capital market are implemented to encourage and ginger the expansion of local investment base in the nation’s capital market.”