While the Nigerian equity market has witnessed increased participation of institutional investors since the economy exited recession in Q2 2017, there has been a significant cut down in transactions by Nigerian institutional investors this year.
Domestic Institutional transactions for the first half year, 2019 plunged 41 percent to N285.04 billion which happens to be the lowest year on year recorded since the country’s economy exited recession in 2017.
This was on the heel of weak investors’ confidence in the economy which has caused the All share index to shed -11.17 year to date in market value as at the close of trading on Friday.
Data from foreign portfolio investment report on the Nigerian stock exchange (NSE)
show that in 2016 when the economy experienced a recession, it recorded N186.16 billion in institutional transaction, a slowdown by 36.7 percent.
However transactions picked up by 76 percent following country’s exit from recession in 2017.
The increase continued in 2018 as institutional transactions recorded a 48 percent increase to N483.65 billion but in 2019 it dropped to N285.04 billion.
Further analysis shows that decline in 2019 is 4.3 percent points more than the decline recorded in 2016, hence the biggest drop in transaction in the last 5 years. The sharp drop has raised questions regarding the activities of the investors as many of them seem to be selling off their stakes rather than buying more to seize lower price opportunities.
Election activities which dominated the first half of the year could be added as a contributory factor as investors sentiments weakened on election results coupled with pessimism of possible fiscal economic policies.
Doyin Salami, Chief Executive Officer, Kainos Edge Consulting said earlier in the year that Nigeria needs a high inflow of investments which will require the need to become indigenous and attractive through equity.
He added that the government needs to develop ways of increasing the inflow of investors through enabling policies and regulations as well as give adequate attention to the fast growing sectors of the economy.
Meanwhile, in the recently released NSE foreign portfolio investment report of June 2019, retail investors sold off stocks worth N78.33 billion against an inflow of N23.41 billion.
