Foreign investors dramatically increased their activity in Nigeria’s equities market in the first quarter of 2025, withdrawing a staggering ₦420.37 billion, more than triple the ₦119.81 billion recorded during the same period in 2024.Â
This represents a 251 percent year-on-year surge in capital outflows, underscoring both the renewed global interest in Nigerian assets and the fragility of investor sentiment amid ongoing reforms.
According to the Nigerian Exchange’s March 2025 Domestic and Foreign Portfolio Investment Report, this outflow surge coincided with the government’s push for economic stabilization, including critical foreign exchange reforms, tighter monetary policy, and market liberalization. While these measures aim to improve macroeconomic fundamentals, they have also introduced new layers of uncertainty for institutional investors.
Block Trades Drive Surge in March
March 2025 proved pivotal, with total foreign transactions jumping to ₦699.89 billion, an extraordinary 1,541 percent increase from ₦42.65 billion in February and ₦71.51 billion in January. This rise was primarily attributed to block trades, which are high-volume, privately negotiated deals typically executed by large foreign institutions. Foreign investors accounted for 62.74 percent of total market trades in March, compared to just 8.37 percent in February.
Interestingly, while foreign inflows in March reached ₦349.97 billion and outflows were nearly identical at ₦349.92 billion, the figures suggest more of a capital rotation strategy than long-term positioning. In other words, institutional players may seek quick gains or hedge against naira volatility rather than committing to Nigeria’s long-term market growth.
Q1 2025: A Mixed Bag for Market Confidence
Looking at the broader picture, total foreign portfolio outflows for Q1 2025 hit ₦420.37 billion, while inflows reached ₦393.68 billion. That’s a 322 percent year-on-year increase in foreign capital inflow, up from ₦93.37 billion in Q1 2024. Despite this, the net deficit stood at ₦26.69 billion—an indicator that investor concerns over policy consistency and economic stability persist.
Total foreign transactions for the quarter reached ₦814.05 billion, a 282 percent jump from ₦213.18 billion in Q1 2024. However, even this remarkable rise could not fully compensate for underlying uncertainties around currency depreciation and inflationary pressures.
Local Investors Step Back as Foreign Interest Peaks
While foreign interest in Nigerian equities surged, domestic participation dipped. In March, domestic transactions fell by 10.98 percent to ₦415.62 billion, down from ₦466.82 billion in February and ₦535.54 billion in January. Both institutional and retail investors reduced their market exposure, suggesting caution in response to the volatile investment climate.
Retail trades dropped to ₦197.12 billion in March from ₦214.51 billion in February. Institutional trades also declined to ₦218.50 billion from ₦252.31 billion in the previous month. Year-to-date, domestic trades stood at ₦1.42 trillion, though they now account for just 63.53 percent of total market activity, compared to 86.23 percent in Q1 2024.
Market Crosses ₦1 Trillion Threshold in March
Total transactions on the NGX surpassed ₦1 trillion for the first time in 2025, reaching ₦1.115 trillion in March. This marked a 107 percent year-on-year increase from ₦538.54 billion in March 2024 and a 119 percent jump from the ₦509.47 billion recorded in February.
In dollar terms, the March trade volume was equivalent to $725.86 million at the prevailing NAFEM exchange rate of ₦1,536.82 to the dollar. This compares with just $341.36 million in February, highlighting the scale of international interest.
Reform Momentum vs Investor Nerves
The rise in foreign participation could signal a rebound of global interest in Nigerian assets, driven partly by monetary tightening and reforms initiated by the Central Bank of Nigeria since mid-2023. However, the persistent naira volatility, falling from ₦1,492.49/$1 in February to ₦1,536.82/$1 in March, and an inflationary uptick to 24.23 percent in March may dampen enthusiasm.
Foreign investors, particularly institutional ones, may be testing the waters for short-term gains, entering during local currency strength and exiting amid renewed depreciation. This speculative behavior points to ongoing skepticism about the government’s ability to implement consistent policy and fiscal discipline.
In the months ahead, investor confidence will largely hinge on the CBN’s success in stabilizing the exchange rate, containing inflation, and ensuring adequate market liquidity. While Q1 2025 saw a historic rise in foreign participation, it remains to be seen whether this momentum can be sustained or whether March was a fleeting spike driven more by arbitrage than confidence.
