In the second quarter of 2024 (Q2 2024), foreign investments in the Nigerian equity market totaled $150 million, a 204 percent rise from $49.4 million in the first half (Q1).
It also represents a staggering 1,660 percent annual rise over the $8.5 million reported in the second quarter of 2023.
According to the Q2 2024 Capital Importation data provided by the National Bureau of Statistics (NBS) on Tuesday, Foreign Portfolio Investment (FPI) in Nigeria in Q2 was at $1.4 billion, down by 32 percent from the $2.08 billion recorded in Q1 of 2024. The FPI increased by around 1,208 percent annually, from $107 million in Q2 of 2023.
Foreign portfolio investments in Nigeria reached $3.48 billion in the first half of the year (H1 2024), a 360 percent year-over-year increase from the $756.1 million registered in the equivalent half of 2023.
Nigerian equity portfolio participation from outside investors was $199.3 million in H1. Nonetheless, this represented a 14% decrease from the $230.8 million reported in the first quarter of 2023. In Q1 of 2024, there was a foreign participation of $222 million in Nigeria’s stocks. However, in the second quarter, this dropped to $8.5 million.
Most foreign portfolio investments in Nigeria during the first half of 2024 were made in money market instruments such as commercial papers, OMO bills, and Treasury bills.
Approximately $2.68 billion, or 77%, of Nigeria’s foreign portfolio investments were in money market products during the period. $1.08 billion in investments were made in Q2, down from $1.61 billion in Q1.
Foreign investment in Nigeria’s money market instruments increased by an incredible 20 times during the half-year, compared to $139 million in H1 2023, year over year. Certain of the extremely high rates provided on certain bills are related to the rise in foreign investment in money market instruments.
For instance, the Central Bank of Nigeria (CBN) offered yields on some of its Treasury bills of up to 22.5 percent in H1 2024. Additionally, the top bank provided OMO bills at 22%, among the highest rates available on CBN-issued money market instruments.
The CBN offered OMO bills at 27.25 percent in the second half to entice foreign portfolio investments into those instruments, increasing the rates.
Private businesses are not excluded from these enormous gains in the loan market. Businesses with stellar credit histories have been selling commercial papers at discounts of twenty-five, twenty-eight, and even thirty percent.
FPIs invested in bonds totaling around $599 million in H1 2024. Of this amount, $420.8 million transpired during the first quarter. Since $386 million worth of FPIs were allocated to bonds in H1 2023, there was a growth of 55% as compared to H1 2023.
The total amount of capital imported into Nigeria in H1 2024 was $5.98 billion, a 177 percent year-over-year increase from the $2.16 million reported in H1 2023. Foreign portfolio investments accounted for almost 58% of all capital imports.
“We can link some of the activities to the recapitalization exercise because we saw a lot of primary market activities on different banking stocks during that quarter,” said Matilda Adefalujo, a banking analyst with Meristem Nigeria.
Investment research expert Samuel Oyekanmi of the finance-focused company Norrenberger connected some of the CBN’s measures intended to boost inflows of foreign money to the increase in activity.
He added, “We may begin with some of the rules that the CBN has enacted to facilitate transactions for foreign portfolio investors in Nigeria. The increased foreign exchange availability also bolstered sentiments about bringing money into the Nigerian market, even if the majority of that money went to money market instruments.”
Oyekanmi also emphasized the high interest rate environment, pointing out that it made Nigeria seem desirable to invest in high-yielding securities.
