CBN I&E Window buoys NSE foreign equity inflows by 324%

Foreign investors staked N95.19 billion on shares of companies listed on The Nigerian Stock Exchange (NSE) in May 2017, 324 per cent increase from N22.45 billion recorded in the preceding month, NSE report has revealed.

The rise in value has increased the proportion of foreign investors’ activities in the bourse to 46.30 per cent compared to 40.89 per cent that the investors contributed in April.

Despite increasing their volume of equity activities on the NSE, the foreign investors have still not regained their dominance of proceedings on Africa’s third largest bourse as domestic investors outperformed them on trading value by 7.40%.

Foreign investors consistently dictated the pace of activities on the NSE from 2011 to 2016, when domestic investors overtook them marginally to account for 55 per cent of the total trade volume.

“Foreign investors activities increased because some of them decided to test the waters by taking position in the market on the back of the Central Bank’s new Investors’ and Exporters’ (I&E) Window,” said Christian Orajekwe, head of research and strategy at Cordros Capital, a Lagos-based investment firm.   “But the foreign investors have not resumed their activities on the exchange to the pre-2016 levels. A whole lot of them are still waiting on the sideline.”

Analysts who spoke to BusinessDay on the condition that they will not be mentioned said that foreign investors’ renewed interest is a far cry from the potential level given that come of them are still waiting to see if the Central Bank of Nigeria will sustain the I&E window.

According to the NSE domestic and foreign equity trading report, net monthly foreign inflows spiked 670.89 per cent from N6.63 billion in April to N51.11 billion in May 2017.

Foreign inflows increased by 403.09% from N14.54 billion in April to N73.15 billion in May 2017. Foreign outflows also increased by 178.63% from N7.91 billion in April to N22.04 billion in May 2017.

“In comparison to the same period in 2016, total FPI transactions from January to May 2017 increased by 74.03% from N189.45 billion to N328.70, whilst the total domestic transactions increased by 38.40% from N279.11 billion to N386.29 billion,” the NSE report said.

A source close to one of the major banks in the country said that despite the relief the new foreign exchange (FX) window provided for the investors, it is still not enough to backlog of unsettled FX demands, scaring a lot of foreign investors from the market.

“An analyst in the bank said they have a cumulative backlog of dollar demands of between $3 billion to $4 billion from investors,” the source said.

An analyst who spoke to BusinessDay said that foreign investors may not be active in the market in the second half of the year as they were in the first half as they may be renewed FX challenges given the current trend of oil prices.

“In addition, MSCI is still uncertain as to what to do with the Nigerian market.”

MSCI is a leading global provider of investment decision support tools such as equity, fixed income, hedge fund, and stock market indexes.

“And foreign portfolio investors watch the MSCI,” the analyst said.

 

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