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Local investors’ participation on NSE drops to 25%

By BusinessNews Staff on June 15, 2014

The level of local investors’ participation on the Nigerian Stock Exchange, NSE, has continued to shrink since the beginning of the year with their percentage contribution to transactions on the Exchange declining to 24.75 percent as at the end of April 2014.

This is in comparison to 35.52 percent total participation recorded by local investors in the same period in April 2013.

The domestic transaction had declined from 50.72 percent in January to 31.41 percent in February and further down to 21.75 percent in March, 2014.

Foreign portfolio investment, on the other hand, accounted for 75.25 percent of total equity transaction within the month, up from 64.48 percent in April, 2013.

However, the institutional composition of the domestic market which was about 46.80 percent at the end of January increased to 59.38 percent at the end of April, while the retail composition decreased from 53.20 percent to 40.62 percent in the same period.

Data from major custodians and market operators on their foreign portfolio investments (FPI) polled by the NSE for the month of April, showed that total transactions in the market increased by 1.35 percent from N181.97 billion in January to N184.43 billion in the review period.

The data indicated that out of N184.43 billion transactions posted during the period, foreign investment inflow into the Exchange through Foreign Portfolio Investors (FPI) accounted for N138.78 billion (about $0.89 billion) in April 2014, up 54.8 percent from N89.67 billion in January 2014.

On the other hand, total domestic transactions stood at N45.64 billion, as against N67.73 billion total transaction in the same period in 2013.

This gives credence to stakeholders’ worry of undue domination of the equity market by foreign investors and contrasts sharply with the Exchange’s optimism of increasing local investors’ participation.

In his remarks at the 2014 ‘Putting Investors First’ day organised by the NSE in conjunction with CFA Society in Lagos, Oscar Onyema, CEO, NSE, had hinted that local investors’ participation in the stock market year-to-date outweighed foreign participation.

According to him, local investors’ participation accounted for close to 60 percent of transactions in the market as at the end of first quarter, 2013, while foreign investors were responsible for about 40 percent.

Meanwhile, lamenting low domestic investors’ participation in the capital market, panelists at the 10th Annual PEARL Award public lecture had said that the trend portends danger to the country’s quest of being African market leader.

[Vanguard]

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