N304 billion lost to foreign divestment in six months

folarin okunola

July 27, 2015 10:51 AM

Total foreign portfolio investment outflow during the period under review stood at N303.59 billion as against inflow of N285.40 billion, representing an N18.2 billion deficit.

The Nigerian Stock Exchange has had a topsy-turvy few months this year

According to several media reports, Nigeria may have lost about N304 billion to divestment by foreign investors.

According to The Nation, the figure which represents over 50 per cent of capital outflow from the capital market, is for the first half of the year.

A report on foreign portfolio investment (FPI) for the first-half of the year obtained at the weekend by The Nation, indicated that about 52 per cent of total foreign transaction value during the six months were divestments, emphasizing the sell pressure being experienced at the stock market.

Total foreign portfolio investment outflow during the period in question stood at N303.59 billion as against inflow of N285.40 billion, representing an N18.2 billion deficit. The half-year deficit figure represents a relatively larger value given the significant undervaluation of the Nigerian equities and the extended deficit Nigeria had suffered since the 2013 financial year.

According to the report, Nigeria had recorded a net foreign portfolio deficit of N154.14 billion in 2014, overriding a modest positive net flow of N20.48 billion recorded in 2013.The 12-month FPI report for last year had shown that foreign portfolio outflow was N846.53 billion as against inflow of N692.39 billion in 2014. In 2013, total foreign inflow stood at N531.26 billion compared with outflow of N510.78 billion.

The FPI report, which is put out by the Nigerian Stock Exchange (NSE), uses two key indicators-inflow and outflow, to gauge foreign investors’ mood and participation in the stock market as a guage for the economy.

The report for the period ended June 30, this year showed that foreign portfolio investors accounted for about 53 per cent of total transaction value while domestic investors accounted for 47 per cent. Total transactions stood at N1.114 trillion, with domestic investors accounting for N525 billion.

Market analysts said the largely negative topsy-turvy situation at the capital market was caused by pre-election concerns and concerns over the macroeconomic and monetary policy direction of the Buhari-led government.

Insecurity, poor infrastructure and an operating environment that isn't exactly encouraging had also combined to shave corporate earnings, which in turn dampened investors’ appetite.

folarin okunola