The Nigerian stock market recorded a net foreign investment outflow of N20.19 billion in January 2025, raising concerns about a potential liquidity crunch.
An analysis by Vanguard using data from the Nigerian Exchange Limited (NGX) reveals that foreign outflows surged to N45.85 billion, while foreign inflows stood at N25.66 billion.
Declining Foreign Inflows
Foreign inflows into the stock market declined 2.3% in January 2025, dropping from N26.26 billion in December 2024. Conversely, foreign outflows rose by 13.2%, increasing from N40.49 billion in December 2024 to N45.85 billion in January 2025.
On a year-on-year (YoY) basis, foreign outflows outpaced inflows by 190.6%. In January 2024, foreign inflows stood at N15.78 billion, compared to the current N45.85 billion.
This trend poses a risk to Naira stability and foreign exchange reserves, as foreign investors convert their holdings into dollars to move capital to more favorable markets.
Total Transactions Decline
NGX data also shows a 9.89% decline in total transactions at the Nigerian stock exchange, dropping from N673.66 billion (about $438.64 million) in December 2024 to N607.05 billion (about $410.84 million) in January 2025. When compared to January 2024, total transactions also fell by 6.83%.
Domestic investors played a dominant role in market activity, accounting for approximately 76% of total transactions.
Foreign vs. Domestic Transactions
Between December 2024 and January 2025, total domestic transactions declined by 11.71%, falling from N606.91 billion to N535.54 billion. However, foreign transactions increased by 7.13%, rising from N66.75 billion (about $43.47 million) to N71.51 billion (about $48.38 million).
Institutional vs. Retail Investors
A closer look at domestic transactions shows that institutional investors slightly outperformed retail investors by 0.16%. However, retail transactions saw a 33.10% increase, rising from N200.87 billion in December 2024 to N267.35 billion in January 2025.
Conversely, institutional transactions declined 33.95%, dropping from N406.04 billion in December 2024 to N268.19 billion in January 2025.
Implications for the Market
The persistent net foreign outflow underscores a growing preference for dollar-denominated assets, fueled by concerns over macroeconomic stability, currency depreciation, and inflation. Market analysts warn that this trend, if unchecked, could limit capital inflows needed for economic growth.