Foreign investors ship-out money from stock market

July 21, 2019

Foreign investors are taking out more money from their investments in the Nigerian stock market.

According to findings by National Daily, foreign Investors shipped out N52.4 billion in investments out of the country compared to the inflow of N41.2 billion. In fact, foreign investment outflow has outpaced foreign investment inflow every month since January 2019.

In total, foreign investor outflow for the period between January and June 2019 was N257.8 billion compared to N214.9 billion in inflows over the same period.

Domestic Retail investor investment was N329.6 billion compared to N285 billion June 2019 year to date.

Since the former CBN Governor, Sanusi Lamido Sanusi lifted the restriction on foreign investor outflow of their investment into Nigeria, the Nigerian Stock Market has come to rely on foreign investment to drive up market values.

There is also a correlation between net positive foreign investor inflow and a positive return in the stock market All-Share Index. The higher the net inflows the higher the possibility that the stock market will post more of bulls over bears.

Now, despite MTN and Airtel listing boosting stock market capitalization by over N3 trillion, Nigerian stocks continue to fall in market valuation.

Typically, stock market drops are associated with overall bad results and or a floundering economy. Ironically, while the economy is still reeling from the recession and poor policy implementation, most quoted companies are still posting strong profits.

Thus, the stock market is suffering more from a lack of demand than anything fundamental.

In 2017, Nigerian Stocks returned a whopping 42.3%, one of the best ever recorded. This was on the back of the introduction of the I&E window, allowing foreign investors to inflow cash into the economy.

In that year total foreign investment inflow was N776.2 billion compared to an outflow of N435 billion. In fact, foreign investor inflow outpaced outflow every month since April when the CBN introduced the window.

Investors in the Nigerian stock market will have to wait for signals that foreign investors are back into the stock market before placing any bet on stocks valuation rising.

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