Foreign investment outflow on the Nigerian Exchange Limited (NGX) increased to N122.97billion in the first half (H1) of 2022.
This represents an increase of 5.4 per cent from N116.72 billion reported in the first half of 2021.
In a report titled, “Nigeria: 2022 mid-year outlook: same challenges, new shocks,” Cardinalstone Limited, noted that since the invasion of Ukraine by Russia, emerging market (EM) debts and equities had suffered a net outflow of $18.7 billion from foreign portfolio investors.
The report further explained that investors were largely risk-averse due to, global hawkish rendition; decline in global liquidity, and erosion of the stock of negative-yielding debt across developed markets from $11.3 trillion at the start of the year to the current value of $2.7 trillion.
It also noted that akin to the trend witnessed in emerging and frontier markets, Nigeria was also mostly unappealing to foreign capital providers in H1 2022.
This risk-off sentiment, the report said, was fanned by geopolitical uncertainties and hawkish rendition from global central banks, in addition to the lack of market reflective FX rates, illiquidity and a backlog of uncleared foreign exchange demand, which had dampened investors’ sentiments.
“Even though it is yet to have any noticeable impact on the market, the recent MSCI proposal to reclassify Nigeria to a stand-alone status was inspired by similar FX concerns. In the first quarter of the year, the combined impact of the mentioned drivers (ex MSCI proposal) cascaded to a 17.5 per cent YoY decline in foreign inflows.
“Specifically, the “other investments” component of capital importation nosedived by 43.3 per cent YoY, while FPI contracted by 1.7per cent YoY. In our view, the imminent intensification of pre-election activities will likely keep foreign investors at bay and throw up more financial account-related concerns,” it stated.
The exit of foreign portfolio investors form Nigeria has largely been blamed on issues with foreign exchange liquidity, which has led to a backlog of delayed external payments and the generally unfriendly investment climate.
Despite the increasing outflow, the latest domestic and foreign investment report by NGX in H1 2022 revealed that foreign investment inflow moved to N120.51billion in H1 2022, an increase of 114.5 per cent from N105.24billion reported H1 2021.
According to NGX report, both foreign and domestic investors have transacted N1.66trillion in the stock market this year, a significant increase of 60.7 per cent from N1.03trillion in H1 2021.
