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Foreign investments drop by 32% in one month

By on December 15, 2014

Foreigners have reduced their investments in the Nigerian Stock Exchange due to concern about insecurity and fears regarding the outcome of 2015 elections.

The latest investment details from the NSE showed that foreign investments dropped significantly by N73.40bn at the end of October.

As of September this year, the total investments by foreign investors stood at N226.68bn.

The document obtained from the NSE on Friday indicated the amount dropped to N153.28bn by October ending. This showed a difference of N73.40bn or 32 per cent.

Some capital market experts who spoke to our correspondent said the consistent reduction in foreign investments was partly due to increasing security concerns as well as tight monetary policies of the Central Bank of Nigeria.

They also said the various activities of the extremist Islamic sect, Boko Haram, as well as the upcoming general elections must have contributed substantially to the reduced investments by the foreigners.

The statistics also showed that domestic investments in the period under review fell significantly.

The local investment, which stood at N296.06bn as of September 2014, dropped by N274.24bn or 92.6 per cent to N21.82bn.

The general reduction of both foreign and local investments, according to experts, has led to a major depression in the capital market as the NSE’s All-Share Index, which measures the performance of the equities on the Exchange, has recorded significant decline.

The Managing Director and Chief Executive Officer, Cowry Asset Management Limited, Mr. Johnson Chukwu, who said the factors leading to the drop were both external and internal, explained that the trend was likely to continue until the second quarter of 2015.

He said, “The factors driving the bear run seem to be worsening. They are declining oil prices, depleting reserves, termination of quantitative easing, likely further tightening of monetary liquidity by the central bank and a possible two-horse unpredictable presidential election in February 2015.

“These factors are most unlikely to reverse in the last quarter of this year. It is, therefore, most probable that the equities market will not recover from its current loss position this year. The earliest time one should expect a rebound is the second quarter of 2015; and this is subject to the outcome of the general elections.”

The Managing Director, Highcap Securities Limited, Mr. David Adonri, said the reduced investments by the foreign investors, who had before now been driving investment in the NSE, was largely as a result of insecurity and the political risk attached to any business initiated in the face of the 2015 elections.

He said, “The decline in foreign investment from July to date has led to a general depression of the equities market. Now, the All-Share Index is negative.

“Some of the factors behind the decline are the heightening insecurity in Nigeria, tight monetary policy of the CBN, tapering of quantitative easing by the United States Feds. Also, the decline in the price of crude oil has contributed to the reduced investments of the foreign investors in our market.”

An analysis of the NSE statistics showed the Foreign Portfolio Investment transactions at the nation’s bourse which had the highest flows for the year in September decreased to N153.28bn (about $0.99bn) in October 2014, down by 32.38 per cent from September 2014’s.

In comparison with the FPI, the domestic transactions also decreased significantly, from 56.64 per cent to 12.46 per cent.

 

[Punch]