•Foreign investment
Foreign investors sold off equities worth N576.09bn on the Nigerian Exchange between January and June 2025, representing an 84.97 per cent increase from the N311.41bn withdrawn in the same period of 2024.
The outflows exceeded foreign inflows, which stood at N559.25bn, resulting in a net negative foreign portfolio position of N16.84bn over the six months, reports The PUNCH.
The figures, contained in the NGX’s June 2025 Domestic and Foreign Portfolio Investment Report, show that foreign trading activity has intensified compared to the same period last year.
Total foreign transactions reached N1.14tn in the first half of the year, more than double the N540.48bn recorded in H1 2024, as economists attributed the surge in outflows to the inconsistencies caused in global markets by the policies of US President Donald Trump, the high yields in T-bills that spurred sell-offs, among others.
Meanwhile, domestic investors accounted for N3.06tn worth of trades between January and June 2025, representing 72.92 per cent of total market transactions. This marks a 41.5 per cent increase from N2.17tn in the same period of 2024. Of the total domestic figure, institutional investors contributed N1.59tn, while retail investors traded N1.47tn.
The near-parity between retail and institutional activity suggests balanced domestic participation over the half-year, though recent months show institutions gaining dominance. Altogether, the total value of transactions on the Exchange during the six-month period amounted to N4.19tn, up 60.98 per cent from N2.60tn recorded in H1 2024.
This rise, though positive in volume, masks growing concerns over the quality of capital flows, particularly the surge in foreign outflows and declining retail activity. A breakdown of monthly data reveals volatile investor behaviour, with large fluctuations in both foreign and domestic trades.
In January 2025, total transactions stood at N346.23bn, split between N269.39bn domestic and N76.84bn foreign. Retail and institutional domestic trades were almost evenly split at N134.17bn and N135.22bn, respectively. By February, activity climbed to N448.52bn. Foreign inflows were N43.67bn, and outflows were N47.93bn, reflecting modest net negative flows. Retail participation dropped to N123.38bn, while institutional trades rose to N170.54bn, indicating a gradual institutional build-up.
March marked the highest activity point in H1 2025. Total transactions surged to N1.29tn, driven by an unusual spike in foreign inflows to N349.97bn—more than the combined total of all other months. Outflows stood at N205.54bn, leaving a net gain of N144.43bn. Institutional domestic investors increased their exposure to N273.74bn, while retail trades reached N212.77bn.
However, April reversed this momentum. Total trades fell sharply to N487.39bn. Foreign inflows dropped to N26.47bn, while outflows rose to N70.20bn. Retail trades fell to N174.10bn, while institutional investors slowed to N180.62bn. The reversal collided with the announcement of a 14 per cent tariff on Nigeria by US President Donald Trump.
In May, foreign outflows remained elevated at N60.94bn, while inflows were subdued at N24.12bn. Institutional investors traded N244.13bn, up from April’s figure, while retail investors increased marginally to N337.46bn. Total trades in May stood at N700.50bn. June data showed another month of high trading activity. Total trades amounted to N778.65bn, the second-highest after March. Foreign inflows recovered to N72.82bn, while outflows moderated slightly to N66.49bn.
The month ended with a net positive foreign position of N6.33bn. On the domestic side, institutional investors accounted for N364.71bn—rising 49.39 per cent from May—while retail trades fell 18.62 per cent to N274.63bn. The foreign investment pattern over the six months indicates an underlying sensitivity to foreign exchange liquidity and policy clarity.
The naira’s appreciation to N1,529.71/$1 at NAFEM in June from N1,586.15/$1 in May may have supported a modest recovery in inflows. However, the continued dominance of outflows reflects lingering concerns over FX repatriation and macroeconomic policy stability.
It was observed that institutional investors have gradually widened their lead over retail participants in recent months. While both groups were nearly even in January and February, institutional trades began to outpace retail trades from March onwards.
The gap became more visible in June, with institutional trades at N364.71bn, compared to retail’s N274.63bn. Retail participation peaked in May at N337.46bn before declining in June. This may be due to inflationary pressures, which continue to erode real wages and reduce the disposable income available for investment.
With inflation hovering above 22 per cent, more households are spending on necessities rather than saving or investing. The strengthening of institutional activity, on the other hand, reflects portfolio rebalancing by pension funds and asset managers seeking higher returns amid rising inflation and tepid fixed-income yields.
Despite the 61 per cent year-on-year increase in market turnover, the investor mix raises important questions about the sustainability of market growth. Foreign investors remain active but cautious, as evidenced by the consistent outflows.
Meanwhile, the gradual dominance of institutional investors points to a concentration of market liquidity within a narrow group of players. Retail investors, who are crucial for market depth and resilience, appear to be stepping back due to economic strain.
Experts speak
Commenting on the development, financial analyst Johnson Chukwu said, “We have to recognise that there have been inconsistencies in Mr Trump’s trade policies, but be that as it may, foreign portfolio investors are still very active in the Nigerian financial market. If you look at the Q1 2025 report of capital importation that was published on Tuesday, you will realise that foreign portfolio investment accounted for the greatest share of the total portfolio capital importation.
“If you look at that report, you will observe that of the total capital importation, foreign portfolio investment accounted for about $5.20bn of the $5.64bn that came into the economy. The money is going into fixed income instruments, going into treasury bills, going into OMO instruments, because the returns on those instruments are guaranteed.
“At some point, until last month, when the central bank began to drop the yield on treasury bills instruments, (OMO was still giving a yield of about 23 per cent), treasury bills were giving yields of about 23-24 per cent, which was quite attractive to foreign portfolio investors. So for them, it was a compelling tool for investment in money market instruments, because if you look at that, of that $5.2bn that came into the portfolio investment, investment in money market instruments was $4.2bn. The money market was $4.2bn, which was investment in OMO and treasury bills. So, if you look at it, equity was only $117m.”
Chukwu, who is the Group Managing Director of Cowry Assets Management Limited added that the disinterest of foreign investors in Nigerian equities may also be because, “Some of them may be perceiving that our equity instruments are already overpriced, overvalued, because if you consider the market gain of last year and this year, we’ve gotten a gain of more than 40 per cent, and the fundamentals of the economy have not materially changed. So, foreign portfolio investors may be thinking that our equity instruments are already highly priced.”
On his part, the Managing Director/CEO of Arthur Stevens Asset Management Limited, Olatunde Amolegbe, said foreign portfolio investors were mostly traders.
“They are also taking a position with the mindset of making a profit. So if they take a position and think the position has made a profit, they will sell off, typically, like any other investor. It does not mean that they will not come back. So I think that the other side of the equation is the quantum of money that came in to buy, relative to last year.
“You will see that on aggregate, what has come in has probably stayed. When it comes to foreign portfolio investment, you cannot only look at one side of the equation. Before money can go out, it must have come in initially. What has happened is just a natural trend, which is that money comes in, and if they have achieved their investment objective, then it goes out. It does not mean it should not come back in again.”
Amolegbe, who was a former President of the Chartered Institute of Stockbrokers, claimed that the equities market was performing better than the fixed income market, with the NGX returning about 40 per cent year to date.
He went on to say that the robust appetite for fixed-income instruments should be expected, given that it serves as a gateway to the equities market.
“Typically, when foreign portfolio investment is coming into the country, it normally uses the fixed income market as a gateway. Then, they will start moving money into equities. Like I said to somebody, typically when foreign direct investment is coming into Africa or West Africa, particularly, what you will see is that most of that foreign direct investment normally goes into Ghana first. What they will say is that Ghana is the gateway to West Africa. But then the other side of that equation is that Nigeria is the ultimate destination.
“So it’s the same way for foreign investors in equities, because fixed income is safer, they will typically come in through fixed income, but ultimately, they will go into equities. Why? Because the return on equity is typically better than that of fixed income. Of course, you also have to recognise that in terms of instruments available for them to go into, typically, the fixed income market is larger in terms of volume than equities.
“So if they are bringing in a lot of money, they have more instruments or more securities to buy in the fixed income market than the equities market. If you look at the market capitalisation of the fixed income market, it is almost three or four times the market capitalisation of the equities market. So when fixed income money comes in, they typically find more outlets in the fixed income market than they can find in the equities market,” Amolegbe stated.
Speaking on the development, a research analyst, Dayo Adenubi, explained that foreign portfolio investors are often driven by data-heavy models and short-term strategies.
“It’s foreign portfolio investments. They’re short-termist,” Adenubi said.
“They’re also very quantitative in their approach and have complex models they use. It helps boost liquidity and price discovery in the market.”
Adenubi noted that many FPIs operating in Nigeria do so via actively managed index funds, which are under constant pressure to outperform benchmarks and deliver strong returns to investors.
“The focus of those funds is to aggressively grow aggregate assets under management because they report to their clients/investors annually. Hence, the pursuit of such alpha makes them short-termist,” he added.
