Nigerian Exchange Group (NGX)
…Investors seek initiatives to reverse weak macro-economic scenario
With the N116.7b pulled from the nation’s stock market from the month of January to June 2021, operators have warned that the precarious state of the stock market could worsen if factors impeding economic growth are not tackled soon.
The operators, while reacting to the latest report from the Nigerian Exchange Limited (NGX), which revealed that foreign investors withdrew a total of N116.72 billion from January to June 2021, said uncertainties that shrouded the nation’s economic outlook, occasioned by insecurity, kidnapping, and other macro-economic challenges would continue to take a toll on the stock market, unless the government adopts new strategic initiatives that will reverse the weak micro economic scenario.
According to the Nigerian Exchange Limited (NGX) Domestic & Foreign Portfolio Investment Report for June 2021, foreign investors invested a total of N105.24 billion in the market representing a year-on-year drop by 57.44 per cent from N247.27 billion recorded in June 2020.
However, foreign investors took out N116.72 billion amounting to a 75.78 per cent decrease from N481.93 billion within the same period in 2020.
The report indicated that total transactions at the NGX increased by 3.68 per cent from N97.19 billion (about $236.33 million) in May 2021 to N100.77 billion (about $244.88 million) in June 2021.
Total transactions executed between the June and prior month (May 2021) revealed that total domestic transactions increased by 0.59 per cent from N76.90 billion in May to N77.35 billion in June 2021.
“The performance of the current month when compared to the performance in June 2020 (N128.88 billion) revealed that total transactions decreased by 21.81 per cent.
Also, in June 2021, total value of transactions executed by domestic investors outperformed transactions executed by foreign investors by about 54 per cent.
“Similarly, total foreign transactions increased by 15.43 per cent from N20.29 billion (about $49.33 million) to N23.42 billion (about $56.91million) between May 2021 and June 2021.”
It also indicated that institutional investors outperformed retail investors by six per cent.
In addition, net foreign portfolio Investment value which is foreign inflows less outflows, stood at -N11.48 billion as foreign investors withdrew more gains from the exchange than they put in as of June 30.
Recall that in 2018, N642.65 billion in foreign portfolio investment outflow was recorded, while foreign investors withdrew N523.42 billion and N481.93 billion during the corresponding period in 2019 and 2020.
Apparently dissatisfied by the huge outflow of capital from the equities market in six months, operators at the weekend predicted gloomy outlook for the market and economy.
They argued that the seemingly improved performance and buying interest in financial services stocks, consumer and industrial goods of the NSE have failed to push the market indices.
The operators insisted that given the increasing level of insecurity, kidnapping, unemployment, weak naira and GDP growth, rising inflation and dwindling revenue, the government has to evolve new strategies to stop investment outflows.
Professor of Economics, Olabisi Onabanjo University, Ago-Iwoye, Ogun State, Sheriffdeen Tella said the economy has not seen steady growth in manufacturing output since the beginning of the year to encourage investment, coupled with the exchange rate has also been depreciating very fast which would have effect on return on investment, particularly for foreign investors.
According to him, these factors cannot encourage investment rather they encourage divestment.
President of New Dimension Shareholders Association, Patrick Ajudua most of the foreign investors are finding it difficult to repatriate their dividends/earnings due to foreign exchange shortages.
He pointed out that the rising inflation has also eroded the value of their returns.
He said they would rather prefer a climate that has a stable forex rate, security of investment and encourages easy repatriation of returns.
The President of Issuers and Investors Adri Initiative (IIADRI), Moses Igbrude said the downward trend in the stock market is a result of the current state of insecurity in Nigeria.
He urged the government to re-strategise and address current macroeconomic concerns, promote issues of national development, tackle prevailing stock market volatility and restore the market to sustainable rebound.
He said: “Investors prefer where their funds and investments are safe. There are other social and economic challenges that are affecting the market. The Federal government should address these issues to reverse this ugly trend.”
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