Foreign investors flee as local funds drive 94.4% of NGX trades

Nigeria’s stock market, despite the 53.81 per cent year-to-date rally, left domestic investors to drive 94.4 per cent of NGX trading in July as local institutions and retail investors poured N10.68 trillion into equities in the first seven months of 2026.

The sharp shift in market participation has turned the Nigerian Exchange into an overwhelmingly domestic-driven market, with foreign participation falling to 5.6 per cent in July, its weakest level so far this year, even as the benchmark index ranked among the stronger-performing markets globally at its 2026 peak.

Data from the Nigerian Exchange showed that total transactions reached N11.98 trillion between January and July, almost double the N6.01 trillion recorded in the corresponding period of 2025.

Domestic transactions surged 126 per cent year-on-year to N10.68 trillion, accounting for 89.21 per cent of total activity and already exceeding the N9.27 trillion recorded throughout 2025.

Foreign transactions, by contrast, remained broadly stagnant at N1.29 trillion, representing just 10.79 per cent of market activity during the seven months.

The divergence was even more pronounced in July, when domestic investors accounted for N2.24 trillion of the N2.37 trillion traded on the exchange, leaving foreign investors with only about N133 billion.

The retreat by foreign investors was also reflected in the flow data.

Foreign inflows fell to N513.36 billion, while outflows rose to N779.43 billion, producing net foreign outflows of N266.07 billion, compared with N61.83 billion a year earlier.

Domestic institutions have emerged as the biggest force behind the market’s increasing local ownership.

Institutional investors’ transactions jumped 145 per cent to N6.71 trillion in the seven months, while retail participation doubled to N3.97 trillion.

The development marks a major structural shift in Nigeria’s equities market, where foreign portfolio investors historically played a significant role in determining liquidity and price direction.

Market analysts, however, believe the retreat may be temporary rather than a permanent loss of interest in Nigerian assets.

Head of Research at GTI Securities, Abiodun Ogunniyi, attributed much of the foreign withdrawal to the uncertainty typically associated with the period ahead of national elections.

He said foreign investors tend to become more cautious during the second half of election cycles, while inflation expectations and the possibility of increased government spending can further discourage offshore equity exposure.

Another major factor is the attractive returns available in the fixed-income market.

Investors can currently obtain yields of around 21–22 per cent on OMO Bills, 18–22 per cent on Treasury Bills and 16–17 per cent on bonds, making the risk-return trade-off less compelling for foreign investors considering Nigerian equities.

“Investors are asking themselves, why should we expose ourselves to the volatility of the equities market when we can just take a position in the fixed income market and still have the same yields?” Ogunniyi said.

He also cited the transition to the T+1 settlement cycle, concerns around Nigeria’s exclusion from major global equity benchmarks and broader perceptions of political and security risks.

Charles Fakrogha, Managing Director/CEO of ECL Asset Management, described the fall in foreign participation to 5.6 per cent as concerning, but said it was largely a matter of investor perception.

He pointed to concerns over Nigeria’s political environment, security situation and government policy direction as factors shaping offshore investors’ decisions.

However, he noted that the heavy participation of domestic investors showed that local institutions still had confidence in the market.

The shift has provided some stability for the NGX by reducing its dependence on foreign portfolio flows, which can reverse quickly in response to global interest rates and emerging-market risk.

That resilience is being tested, however, as the market recently entered a sharp correction.

The NGX All-Share Index closed at 239,351.16 points on August 21, while market capitalisation fell to N154.53 trillion, extending a 10-session losing streak that has wiped about N5.6 trillion from investors’ wealth since August 11.

Despite the correction, the market remains strongly positive for the year, with a 53.81 per cent year-to-date return.

Analysts expect foreign participation to improve if political uncertainty eases later in the year, T+1 operational concerns are resolved, and Nigeria receives more favourable treatment from global index providers.

The potential listing of major companies and improved corporate earnings could also provide fresh catalysts.

For now, however, Nigeria’s stock market is being carried largely by its own investors. The unprecedented N10.68 trillion domestic turnover shows that local capital has become the principal engine of the NGX, even as foreign investors pull more than N266 billion out of the market.