Foreign investors are fleeing Nigerian equities at record levels, cashing out ₦576.09 billion from the Nigerian Exchange (NGX) in just the first half of 2025 — a sharp 85% jump from ₦311.41 billion in the same period last year.
According to the June 2025 Domestic and Foreign Portfolio Investment Report by the NGX, foreign portfolio outflows outpaced inflows, which stood at ₦559.25 billion, leaving a net negative position of ₦16.84 billion. While foreign trading activity has intensified compared to 2024, the trend reveals a concerning tilt: more capital is flowing out than in.
What’s Fueling the Foreign Sell-off?
Economists point fingers at several culprits:
• Uncertainty in global markets, spurred by US President Donald Trump’s trade policies.
• Attractive yields on Nigerian Treasury Bills (T-bills), which have lured investors away from riskier equities.
• Concerns over FX repatriation, naira volatility, and macroeconomic ambiguity.
In March, Nigeria witnessed an unusual surge in foreign inflows — ₦349.97 billion — which quickly faded in April and May following Trump’s shock announcement of a 14% tariff on Nigerian exports. Outflows climbed back up, and retail activity began to falter.
Domestic Investors Dominate, Institutions Lead the Charge
While foreign investors tread cautiously, local participation is booming. Between January and June 2025, domestic investors accounted for ₦3.06 trillion — 72.92% of all market transactions. That’s a 41.5% rise from ₦2.17 trillion in H1 2024.
Notably:
• Institutional investors traded ₦1.59 trillion, slightly edging out retail investors at ₦1.47 trillion.
• The gap widened by June, with institutions trading ₦364.71 billion, compared to ₦274.63 billion by retail investors.
Analysts say rising inflation — currently over 22% — is squeezing household budgets, leaving retail investors with less disposable income to invest.
Expert Insights: “Fixed Income is the Real Magnet”
Financial analyst Johnson Chukwu, CEO of Cowry Assets Management, broke down the capital inflow trends:
“Of the $5.64 billion in total capital importation in Q1 2025, a massive $5.20 billion came from foreign portfolio investments — $4.2 billion went into T-bills and OMO, not equities.”
He added that foreign investors may be wary of overpriced Nigerian equities, especially after a 40%+ market rally over the past year without significant improvements in economic fundamentals.
Meanwhile, Olatunde Amolegbe, MD of Arthur Stevens Asset Management, emphasized the cyclical nature of FPIs:
“They’re traders. Once they hit profit targets, they pull out. But that doesn’t mean they’re gone forever — they’ll return when the timing is right.”
He also stressed that foreign money typically enters through fixed income markets before moving into equities, drawn by the relative safety and size of the bond market.
What This Means for the NGX and Market Outlook
Despite a 61% YoY increase in total market turnover (₦4.19 trillion in H1 2025 vs. ₦2.6 trillion in H1 2024), the numbers mask growing concerns:
• Foreign outflows signal caution, not confidence.
• Institutional investors are driving domestic growth, while retail participation is shrinking.
• Market liquidity is becoming more concentrated, raising questions about long-term resilience and diversity of capital sources.
As the naira showed modest recovery in June (₦1,529.71/$1 at NAFEM) and the Central Bank began tapering T-bill yields, a slight recovery in foreign inflows was observed — but the overall sentiment remains cautious.
Final Thoughts: The Road Ahead
The Nigerian stock market is buzzing — but beneath the surface, it’s a tale of rising domestic dominance, foreign uncertainty, and retail retreat. While institutions continue to prop up the NGX, true long-term growth depends on restoring investor confidence, both local and foreign.
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