BY CHARLES ABUEDE
Domestic investors continue to hold ground on the floor of the Nigerian Exchange despite rising inflation and currency volatility in the foreign exchange market as they were major drivers of the whooping N692.20 billion total portfolio investment (FPI) that entered the market and, therefore, the economy in the first quarter of 2022.
The figure represents an increase of 2.3 percent year on year from the same period last year when it recorded N676.53 billion. The FPI outflow includes sales transactions or liquidation of portfolio investments through the stock market, whilst the FPI inflow includes purchase equities transactions on the NGX.
The NGX, in its recent report on domestic and foreign portfolio participation in equity trading, revealed the extent of market play for the period. The report, which is a monthly poll of trading figures from market operators on their domestic and foreign investment (FPI) flows, shows that during the period, January saw the highest inflow of portfolio investment through equity as the month recorded N323.38 billion. This increase was recorded at the start of the year as a result of investors rebalancing their portfolios for the year and taking strong buying interests in some of the stocks with strong fundamentals.
Consequently, there was the regaining of confidence in the market which saw it climb above N25 trillion in capitalization, primarily driven by market reactions to BUA Foods listing by introduction on the NGX, the share buyback programme by Dangote Cement and the earnings report from a number of heavyweights which lifted market sentiments and drove broad-based buying interest across the local bourse.
As a result, the benchmark index closed the month above the 46,000 psychological points and further leapt into February on a bullish rally with the benchmark index travelling past the 47,000 points. The bullish trend so far may have shown signs of confidence and market appreciation, but it is without a doubt that the widespread corporate actions from companies brought about the re-ignition of risk-on sentiments amongst equity investors. As a result, the month of February closed with a total of N183.56 billion in total foreign portfolio investment through equity transactions.
Driving further into the month of March, which was the close of the first quarter of 2022, the NGX data on domestic and foreign portfolio participation on the nation’s bourse show a rise of 0.93 percent month on month to N185.26 billion from N183.56 billion in the prior month. Thus, the Exchange‘s data showed that the outcome in March underperformed the same period last year when the total investment through equity portfolio was N228.49 billion, indicating an 18.92 percent year on year decrease in 2022.
Meanwhile, in the month of March 2022, the total value of transactions executed by Domestic Investors outperformed transactions executed by Foreign Investors by 54 percent. Further analysis of the total transactions executed between the month under review and the prior month (February 2022) revealed that total domestic transactions increased by 3.59 percent from N138.13 billion in February to N143.09 billion in March 2022. In comparison, total foreign transactions decreased by 7.17 percent from N45.43 billion, which is equivalent to about $109.30 million, to N42.17 billion and also equivalent to about $101.36 million, between February 2022 and March 2022.
A cursory analysis of the domestic transactions, from the NGX data of capital market operators during the month shows that the institutional investors outperformed retail investors by 16 percent. A further evaluation of domestic transactions in the current and prior month (February 2022) revealed that retail transactions decreased by 1.27 percent from N61.39 billion in February 2022 to N60.61 billion in March 2022. However, the institutional composition of the domestic market increased by 7.48 percent from N76.74 billion in February 2022 to N82.48 billion in March 2022.
Also, the data highlighted the performance of the equities market over the last decade and showed that domestic transactions decreased by 58.80 percent from N3.56 trillion in 2007 to N1.47 trillion in 2021 whilst foreign transactions also decreased by 29.38 percent from N616 billion to N435 billion over the same period.
Meanwhile, the total domestic transactions during the period accounted for about 77 percent of the total transactions carried out in 2021, whilst foreign transactions accounted for about 23 percent of the total transactions in the same period. Hence, the transaction data for 2022 shows that total domestic transactions are circa N563.29 billion, whilst total foreign transactions are N129.01 billion.