Foreign Portfolio Outflows surge by 237% in Q1 2024 amid CBN reforms 

  • Foreign Portfolio Outflows surged by 237% between Q1 2023 and Q1 2024. 
  • This trend shows that foreign investors are pulling out more funds than they are bringing into the Nigerian equity market amid reforms by the central bank. 
  • Yemi Cardoso, Governor of the Central Bank of Nigeria, says it is a normal free market scenario for investors to come and go. 

Foreign portfolio investment (FPI) outflows surged by 237% in the first quarter (Q1) of 2024 compared to the same period in 2023. 

According to Foreign Portfolio Investment data published by the research department of the NGX, foreign portfolio outflows more than tripled, underscoring heightened market reactions amid recent Central Bank of Nigeria (CBN) reforms. 

The outflow in Q1 2024 was N119.81 billion, more than three times that of Q1 2023, which recorded N35.59 billion.  However, the total foreign portfolio inflow for Q1 2024 (N93.37 billion) was more than quintuple that in Q1 2023 (N18.12 billion). 

The data for Q1 2024 further showed that Nigeria’s equity market witnessed a significant disparity between foreign portfolio inflows and outflows.

The total foreign portfolio participation in equity trading showed a pronounced trend of outflows surpassing inflows, highlighting concerns over investor confidence and market stability. Overall, the first quarter of 2024 recorded a total foreign inflow of N93.37 billion against a foreign outflow of N119.81 billion.

The total net outflow for the quarter was N26.44 billion, underscoring a trend where foreign investors are pulling out more funds than they are bringing into the Nigerian equity market. 

Monthly Breakdown 

In January 2024, foreign portfolio investments showed a significant disparity between inflows and outflows, with foreign outflows more than doubling the inflows, standing at N37.33 billion against an inflow of N15.78 billion.

  • Comparatively, January 2023 had an inflow of N9.84 billion and an outflow of N15.06 billion. This represents a 60.3% increase in inflows and a 147.8% increase in outflows year-over-year for January. There was a net outflow of N21.55 billion in January 2024, setting the tone for the subsequent months. 
  • In February 2024, foreign inflows were recorded at N24.93 billion, while outflows amounted to N40.88 billion. In contrast, February 2023 saw an inflow of N3.68 billion and an outflow of N15.94 billion.
  • This indicates a substantial increase of 577.7% in inflows and a 156.4% increase in outflows for February. The net outflow for February 2024 stood at N15.95 billion, further widening the gap between incoming and outgoing investments. 
  • March 2024 saw the highest inflow within the quarter at N52.66 billion, with outflows remaining substantial at N41.60 billion.
  • Compared to March 2023, which recorded an inflow of N4.60 billion and an outflow of N4.59 billion, there was a remarkable increase of 1044.8% in inflows and 806.3% in outflows. This was the only month in the quarter with a positive net inflow, which was at N11.06 billion. 

Implications of higher outflows 

The significant rise in foreign portfolio outflows amid CBN reforms in Q1 2024 likely has several implications. Firstly, the increase in outflows may indicate a lack of confidence among foreign investors in the Nigerian market.

  • This could be due to uncertainties surrounding the reforms, perceived risks, or expectations of better returns elsewhere.
  • Such a trend can put pressure on the Nigerian naira, potentially leading to depreciation, as foreign investors convert their holdings to foreign currencies, increasing the demand for these currencies relative to the naira. 
  • Higher outflows can also reduce liquidity in the Nigerian financial markets, leading to higher borrowing costs and potentially stifling economic growth if businesses find it more challenging to access capital.
  • Additionally, increased foreign outflows can lead to a decline in stock prices as foreign investors sell off their holdings. This can result in reduced market capitalization and lower investment returns for local investors. 

If the outflows are substantial, they could signal broader economic issues that might affect overall economic growth.

Reduced foreign investment could mean less capital for businesses, leading to lower levels of investment and growth in the economy. 

CBN’s Perspective 

Speaking at the end of the 294th meeting of the Monetary Policy Committee (MPC), the CBN governor, Yemi Cardoso, said that it is normal for investors to come and go. 

The CBN governor said: “As indeed with any market, there is free entry and free exit. That is what you will expect in any market. Whether it is a foreign exchange or the stock market, this is how it works. What we have seen is that portfolio investors do come in and at a certain level, they go out again. I know of some that have come in, gone out and are coming back again. That is how we normally expect those markets to function.” 

He also said that the apex bank has met with foreign investors to understand what they seek in the market and make necessary reforms, such as ensuring more transparency. 

Cardoso added that the clearing of the forex backlog was prioritised to strengthen investors’ confidence in the country. He reaffirmed that there is now a renewed and sustained confidence in the Nigerian market. 

He also said that the recent improved ratings from agencies like Fitch adds to investors’ confidence. 

What you should know 

  • Victor Onyema, Lead, Portfolio Management Norrenberger Asset Management, earlier told Nairametrics that there was some encouragement with the CBN’s recent efforts to restore market confidence and enhance communication with investors. This proactive approach will likely generate renewed interest in the Nigerian investment landscape, particularly amongst Foreign Portfolio Investors (FPIs).  
  • The substantial rise in foreign portfolio investment outflows during Q1 2024 is indicative of investors’ responses to the ongoing economic and financial reforms by the CBN. These reforms have been pivotal in reshaping the market dynamics and influencing investment decisions. 
  • However, the rise in outflows raises concerns about the investment climate in Nigeria, suggesting a need for strategies to boost investor confidence and attract more stable foreign investments. 


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