The dwindling fortunes of the Nigerian economy is having adverse effect on the Nigerian stock market as foreign portfolio investors have reportedly pulled out N410.49 billion from the equities section of Nigerian Stock Exchnage (NSE) between January and August 2015.
According to figures made available by the NSE, foreign investors, who accounted for 57.52% of the total transactions in 2014 have so far made an inflow of N367.10 billion, which is N43.39 billion less than the outflow.
Although it was expected that domestic investors would seize the opportunity to dominate the market, the foreign investors still accounted for 54.36% of the N1.430 trillion transactions in equities as of August.
A further look at the indices show that in the first four months of the year, the inflow exceeded the outflow, but that statistics began to rescind following the assumption of office by President Muhammadu Buhari with the NSE All Share Index giving a return of -12.40.
Reacting to the statistics, the Head, Investment and Research, Sterling Capital, Sewa Wusu, said: “A combination of factors has actually been affecting the Nigerian economy and by extension we have seen reactions in the financial markets generally. They are headwinds that investors would naturally react to because of the fear of eroding the value of their investment.
“Most investors are just exiting to preserve their capital and wait for the tide to clear because they cannot just make investment decisions when there is no clarity in the macroeconomic space.”
When asked why local investors failed to take advantage of the exit of foreign investors, the Managing Director, Cowry Asset Management Limited, Johnson Chukwu said: “If you look at the portfolio of the PFAs, you will see that they are getting underweight in equities; they are shifting much more of their funds to Federal Government Treasury Bills and bonds, which simply mean that they have more faith in the fact that interest rates would go up further.
“We are in an economy where because of unclear economic policies, you cannot say that equity prices will rally.”
