Foreign Portfolio Investments (FPIs) in Nigeria increased to N321.04 billion in the third quarter of 2022, up 11.8 percent from N287.2 billion in the same period in 2021.
The figure represents the value of foreign investment inflows into the Nigerian stock market during the period.
Though FPIs are referred to as ‘hot money’ due to the speed with which it enters and exits, analysts believe the higher balance in the FPI position is due to investors’ inability to repatriate their money due to the dollar shortage currently being experienced in the country.
Meanwhile, retail stock market investments continued to rise, reaching N556.78 billion in Q3’22, a 27.5 percent increase over N436.53 billion in the same period in 2021.
Analysts attributed this increase to increased investor confidence brought about by several changes in the market environment this year.
“Through regulatory interventions by the Securities and Exchange Commission (SEC) and the Central Bank of Nigeria (CBN), new rules have been made to regulate several unregulated practices in the capital market, particularly margin trading, which mismanagement caused the credit boom that precipitated the dangerous asset bubble,” analysts noted.
The Nigerian Exchange Limited (NGX) foreign investors contributed 16.3 percent of the total value of transactions at N1.97 trillion in Q3’22, while retail investors contributed 28.3 percent.
The CEO of APT Securities & Funds Limited, Garba Kurfi commented on the FPI position: “We are not surprised by the increase in Foreign Portfolio Investments, which was caused by a lack of foreign currency, which prevented foreign investors from repatriating their funds; instead, they buy back stocks and dividends received, which cannot be taken away.
“They would rather purchase more stocks. “Few have decided to bring in additional funds in order to take advantage of the low stock prices.”
“As a result of the devaluation of the Naira, we are expecting more inflow to take advantage of the low price stocks as most of the blue chips are trading at 53 weeks low,” he said of Q4’22 projections.
Also, an investment banker/Chartered Stockbroker, Tajudeen Olayinka commented: “The desire to move capital around the world for greater portfolio return (capital mobility) and the effect of inflation on nominal values may be responsible for the nominal increase in the value of investments by foreign portfolio investors.”