RHODA OGUNSEYE 
The gradual crowding out of foreign investors from Nigeria’s capital market is becoming noticeable as local investors’ participation is fast increasing, while the assurance of credible 2023 general elections is also boosting investor confidence. RHODA OGUNSEYE writes
From all indications, the Nigerian stock market has continued to defy increased political activities in the polity as momentum gathers towards the 2023 general elections, as well as insecurity and economic instability, to record growth.
Transactions Between
January and May, 2022, the total value of domestic and foreign transactions on Nigerian Exchange Limited (NGX) recorded a total sum of N1.506 trillion. These figures show N933.65 billion higher than the total transactions carried out by both domestic and foreign investors in the corresponding period of 2021. According to NGX Regulation Limited, the Domestic and Foreign Portfolio Investment (FPI) in May 2022 report captured these transactions as well as trading figures from market operators.
Despite the rising inflation and volatility in the foreign exchange, which remained key drivers of the Domestic & Foreign Portfolio Investment, domestic investors have continued to hold ground on the floor of NGX. Foreign transactions stood at N201.29 billion, accounting for about 13.37 per cent of the total transactions carried out from January to May, while domestic transactions constituted N1.304 trillion, representing 86.63 per cent of the total transaction, outperforming the foreign investment during the same period. Another report from NGX showed that transactions rose to N607.45 billion in the first six months of this year, as against N100.77 billion recorded in the corresponding period of 2021, representing a 55.32 per cent surge. This is even as the total value of transactions executed by domestic investors outperformed those executed by foreign investors by 46 per cent in June 2022. The Domestic and Foreign Portfolio Investment (FPI) in June 2022 report released by NGX Regulation Limited captured these transactions as well as trading figures from market operators.
Domestic players
Analysing the report, details of the trading profile revealed that domestic participation increased by 73 per cent as against 27 per cent recorded by its foreign counterpart. Also, the value of domestic inflows and outflows grew by N114.33 billion while foreign inflows and outflows stood at N42.19 billion. However, total transactions executed between the current and prior month (May 2022) revealed that total domestic transactions decreased significantly by 72.16 per cent from N562.15 billion in May to N114.33 billion in June 2022. Similarly, total foreign transactions decreased by 6.87 per cent from N45.30 billion (about $108.02 million) to N42.19 billion (about $100.15 million) between May 2022 and June 2022. Over a 15-year period, domestic transactions had decreased by 58.80 per cent from N3.556 trillion in 2007 to N1.465 trillion in 2021, whilst foreign transactions also decreased by 29.38 per cent from N616 billion to N435 billion over the same period. Furthermore, total domestic transactions accounted for about 77 per cent of the total transactions carried out in 2021, whilst foreign transactions accounted for about 23 per cent of the total transactions in the same period. The report, thereafter, revealed that total domestic transactions stood at N1.419 trillion, while total foreign transactions stood at N243.48 billion. This developments have made it urgent on regulators in the capital market to leverage technology to enhance retail investor participation and drive listings.
Enhancing financial inclusion,
Temi Popoola, Chief Executive Officer, NGX while speaking recently at the NGX CEO Roundtable themed “Creating the Enabling Ecosystem for Accessing Capital from the Nigerian Capital Market,” noted that financial literacy and inclusion remained at the front burner for stakeholders in the capital market. Popoola said that the Exchange made it a priority to contribute its quota towards the achievement of key targets of Nigeria’s National Financial Inclusion Strategy through initiatives that encourage the wider investing public to develop investment habits. “To drive listings, we are taking a closer look at our rules to see areas of amendments to ensure companies raise capital more efficiently whilst protecting the investing public. NGX is also working with several stakeholders to ensure that the time to market and the costs for listing are optimised,” he said.
Stakeholders’ views
Speaking on the importance of raising awareness about the capital market, Mr. Karl Toriola, CEO, MTN Communications Nigeria Plc, revealed that MTN had implemented activities in driving capital market awareness and participation across eight locations in Nigeria. “In the world of digital information, leveraging on the digital ecosystem to really educate people on the benefits of the capital market is very critical and the capillarity that has been created by stakeholders has deepened confidence. Using the digital system to optimise the immediate distribution of shares boosts more confidence in the capital market. We need to include the capital market in the curriculum of educational institutions,” he added. CEO, BUA Foods Plc, Ayodele Abioye, an engineer, further highlighted the need to drive capital market participation among youths and attract retail investors using technology. In his words, “Technology is key as we are in an industry 4.0 era where everything is smart.
The younger generation wants things as quickly as possible; they want a quicker way to get their investments back and so we must think of products that can address this. With the advent of COVID-19, tech has evolved and, as a result, we need to do more road shows and set up stock exchange clubs to reach the youths.” On his part, Mr Haruna Jalo- Waziri, CEO, Central Securities Clearing System Plc (CSCS), said that Ponzi schemes thrived because the onboarding technique was done immediately. He said there was a need to improve on the onboarding technique in the capital market. According to Mr Funso Akere, CEO, Stanbic IBTC Capital, technology plays a pivotal role in the time to market as it simplifies the process and capital market regulators would need to bring in the technology that can transform operations as well as allow for the introduction of some of the innovations already debated.
Furthermore, panellists have asked regulators to review the time to market and make the capital market more attractive for all key players via technology. The Securities and Exchange Commission (SEC), on Sunday, said that its Capital Market Master Plan (CMMP) initiative was promoting transparency, protecting investors and enhancing market confidence. It said the 10-year CMMP launched in November 2014 was to reposition Nigeria as an attractive investment destination and to make Nigeria a viable investment destination and critical facilitator of capital formation for accelerated growth and development.
Last line
The Commission also stated that it was ready to hold its second Capital Market Committee (CMC) meeting for exchange of ideas among market stakeholders.
