Nigeria: Foreign investors withdraw $4.5bn from stock market as polls nears

The anxiety over the outcome of the 2015 elections has exacerbated economic and political risks in the country, resulting in foreign investors pulling N846.53 billion from the Nigerian Stock Exchange (NSE) in 2014.

The figure represents 65.7 per cent increase on the N510.78 billion foreign portfolio investment outflow from the stock market in the corresponding period of 2013.

The NSE polls trading figures from major custodians and market operators on their Foreign Portfolio Investments (FPI).

On the contrary, total foreign inflow in 2014 was up 30.32 percent to 692.39 billion from N531.26 billion in 2013.

According to NSE, total transactions at the nation’s bourse increased by 41.83 per cent from N181.97 billion recorded in January to N258.08 billion in December 2014.

According to capital market analysts, the exit of foreign investors from the equities market was a major reason for its poor performance in 2014 during which the market closed with a negative return of 16.14 per cent.

They noted that foreign investors were exiting the Nigerian stock market due to the falling global oil prices, activities of insurgents in the north east of Nigeria, the fear of the outcome of 2015 general elections and the devaluation of the naira.

Chief executive officer, Highcap Securities Ltd, Mr. David Adonri, explained that the sustained sell-off and outflow resulted from the unexpected continued decline in the prices of crude oil in the international market and increasing political risks in the country.

NSE chief executive officer, Mr. Oscar Onyema, confirmed that the outflow was a major factor in the poor performance of the market.

“In the capital market, bearish sentiments prevailed for most of the year as foreign investors steadily withdrew from the Nigerian market due to currency risk and the recovery of developed economies, and the effects of the US Federal Reserve tapering off its quantitative easing policy,” Onyema said.

He added that the air of uncertainty that hovered over the Nigerian capital market throughout 2014 caused investors to increasingly adopt a ‘flight to quality’ strategy.

-Leadership (Ng)