Report: Foreign Portfolio Investors Flock Back to Nigeria, Boosting Market Share, External Reserves

Foreign Portfolio Investors (FPIs) have made a significant return to Nigeria, injecting N120.8 billion into the market in April 2024. This marks the fourth consecutive month of rising inflows, driven largely by the Central Bank of Nigeria’s (CBN) hawkish monetary policies.

The Nigerian Exchange Limited (NGX) reported that FPI participation in the market soared to N120.83 billion in April 2024, up from N94.26 billion in March. This investment surge lifted foreign investors’ market share to 34.90 percent, the highest in 28 months.

As a result, Nigeria’s external reserves saw a 0.32 percent month-on-month increase, reaching $33.827 billion in April, reversing a prior decline. FPIs had dwindled to a mere four percent in April 2023 due to concerns over foreign exchange regulations and monetary policies. However, confidence began to return following the unification of the exchange rate and the removal of the fuel subsidy.

Analysts at Afrinvest Securities Limited attributed the renewed interest from foreign investors to the CBN’s aggressive interest rate hikes, which raised the Monetary Policy Rate by 600 basis points to 24.75 percent within February and March 2024. This policy has made Nigeria’s money market one of the most attractive globally.

The CBN also implemented several measures in the forex market, such as clamping down on cryptocurrency platform Binance, harmonizing foreign currency exposure reporting requirements for banks, and clearing all valid foreign exchange backlogs.

Afrinvest analysts noted that the CBN’s tough stance on inflation and currency stability has resonated well with foreign investors, although they remain cautiously optimistic about future FPI inflows.

Coronation Asset Management analysts highlighted the Federal Government’s receipt of about $2 billion in FPI since last year. They pointed out that with Nigerian Treasury Bill yields comfortably over 20 percent, foreign investors are likely to find Nigerian securities attractive again. However, they noted that $2 billion is relatively small in the broader context of Nigeria’s FPI history.

David Adonri, Vice Chairman of Highcap Securities, commented on the positive impact of increased FPI on the exchange rate and foreign reserves. He noted that rising FPI is indicative of growing foreign investor confidence in both the market and the broader economy.