In January 2025, foreign investors pulled out N45.85 billion from the Nigerian stock market, a figure that starkly outweighed the N25.66 billion in foreign inflows recorded during the same period. This trend highlights growing concerns over declining foreign participation in the market, despite the relative stability of the naira.
According to the latest Nigerian Exchange Domestic and Foreign Portfolio Investment Report, foreign outflows made up 64.12% of total foreign transactions on the exchange. While total foreign transactions rose by 7.13%—from N66.75 billion in December 2024 to N71.51 billion in January 2025—the increase was primarily driven by investors liquidating their holdings rather than making new investments. This suggests a growing preference among foreign investors to exit the market, contributing to capital flight.
The report also revealed a 9.89% decline in total equity transactions on the Nigerian Exchange (NGX), which fell from N673.66 billion in December 2024 to N607.05 billion in January 2025. On a year-on-year basis, total transactions dropped by 6.83% compared to N651.52 billion recorded in January 2024. This decline reflects subdued investor sentiment, as both foreign and domestic players remain cautious amid ongoing economic challenges.
Foreign vs. Domestic Investor Activity
Foreign investors accounted for just 11.78% of total market transactions in January 2025, while domestic investors dominated with 88.22%. Although foreign participation saw a slight increase from 9.91% in December 2024, it remains significantly below historical levels, when foreign investors played a more substantial role in market liquidity and depth.
The disparity between foreign inflows and outflows underscores the reluctance of foreign investors to commit fresh capital to Nigerian equities. Meanwhile, domestic transactions revealed a notable shift in investor behavior. Institutional investors, who typically drive market stability, reduced their participation by 33.95%, with transactions falling from N406.04 billion in December 2024 to N268.19 billion in January 2025. In contrast, retail transactions surged by 33.10%, rising from N200.87 billion to N267.35 billion over the same period. This shift suggests that retail investors may be capitalizing on perceived bargain opportunities, while institutional investors remain cautious.
Exchange Rate Stability and Macroeconomic Challenges
Despite the withdrawal of foreign funds, the naira showed signs of stability, appreciating from N1,535.81/$ in December 2024 to N1,478.22/$ in January 2025. However, this currency stability has not been enough to reverse foreign investor sentiment, as broader macroeconomic challenges continue to weigh on confidence.
Historical Context
The NGX report provided a broader historical perspective, showing that over an 18-year period (2007–2024), domestic transactions grew by 33.15%, from N3.556 trillion to N4.735 trillion, while foreign transactions increased by 38.31%, from N616 billion to N852 billion. However, foreign participation has steadily declined in recent years, with foreign investors accounting for only 15% of total transactions in 2024, compared to domestic investors’ 85% share.
Call for Policy Reforms
The report underscores the need for measures to attract foreign investors back to Nigerian equities. Key steps include implementing more stable macroeconomic policies, improving market transparency, and strengthening investor confidence. The Central Bank of Nigeria’s monetary tightening policies, aimed at curbing inflation and stabilizing the naira, are gradually fostering renewed foreign interest in the equity market. However, sustained efforts will be required to restore the market’s appeal to international investors.