Foreign Investors Exit Nigerian Stock Market with N576bn Selloff in H1 2025

Foreign investors pulled out a total of N576.09 billion from the Nigerian stock market in the first half of 2025, marking a significant rise of nearly 85% compared to the N311.41 billion withdrawn during the same period in 2024.

The latest figures, released in the Nigerian Exchange Group’s (NGX) Domestic and Foreign Portfolio Investment Report for June 2025, show that foreign outflows outpaced inflows, which stood at N559.25 billion. This led to a marginal net deficit of N16.84 billion in foreign portfolio investments for the first six months of the year.

Altogether, foreign-related transactions on the NGX climbed to N1.14 trillion in H1 2025—more than twice the N540.48 billion recorded during the same timeframe last year. Analysts attribute the surge in outflows to heightened global market volatility, which has been linked to shifting U.S. trade policies under President Donald Trump, and the allure of higher-yielding fixed-income assets like treasury bills.

Meanwhile, local investors remained dominant, accounting for N3.06 trillion—or roughly 73%—of total market activity between January and June. This represents a 41.5% increase from N2.17 trillion in H1 2024. Institutional players led the charge with N1.59 trillion in trades, while retail investors contributed N1.47 trillion, showing near-equal participation domestically.

However, recent trends suggest institutional investors are beginning to outpace retail participants, with a wider gap emerging in the second quarter. Total turnover for the period stood at N4.19 trillion, up 61% from the N2.60 trillion posted in H1 2024. While this points to growing market activity, concerns remain about the sustainability and quality of capital flows—particularly given the sharp rise in foreign withdrawals and signs of slowing retail interest.

Monthly Breakdown: Surges and Dips

Investor sentiment and market activity fluctuated noticeably month-to-month. In January, total market turnover stood at N346.23 billion, with domestic investors contributing N269.39 billion and foreign investors N76.84 billion. Retail and institutional trades were nearly evenly matched at N134.17 billion and N135.22 billion, respectively.

February saw trading volumes rise to N448.52 billion. Foreign inflows came in at N43.67 billion, with outflows slightly higher at N47.93 billion. Institutional domestic trades grew to N170.54 billion, while retail trades dipped to N123.38 billion.

March turned out to be the busiest month in H1 2025, with total activity hitting N1.29 trillion. A major spike in foreign inflows—N349.97 billion—drove the surge, despite outflows of N205.54 billion. On the domestic front, institutional trades reached N273.74 billion, while retail investors added N212.77 billion.

However, April reversed the upward trend. Trading dropped to N487.39 billion, with foreign inflows falling to N26.47 billion and outflows rising to N70.20 billion. Institutional and retail trades slowed to N180.62 billion and N174.10 billion respectively. The sharp decline coincided with the announcement of a 14% tariff on Nigerian goods by the U.S. government.

In May, foreign exits remained high at N60.94 billion, while inflows stayed weak at N24.12 billion. Domestic institutional trades rebounded to N244.13 billion, while retail activity saw a moderate uptick to N337.46 billion. Total trading volume stood at N700.50 billion.

June brought another round of robust trading, with overall volume hitting N778.65 billion. Foreign inflows improved to N72.82 billion, and outflows dropped slightly to N66.49 billion—resulting in a net foreign inflow of N6.33 billion. Institutional investors increased their activity significantly to N364.71 billion (up 49% from May), while retail investors pulled back to N274.63 billion, marking an 18.6% drop.

Experts believe that foreign investors remain highly sensitive to Nigeria’s currency market and policy signals. The naira’s appreciation from N1,586.15/$ in May to N1,529.71/$ in June may have helped improve sentiment slightly. Still, overall foreign sentiment appears cautious, due in part to repatriation risks and broader economic policy uncertainty.

Institutional Strength vs Retail Strain

Institutional investors have steadily widened their lead over retail participants, especially since March. While both groups traded nearly equal volumes early in the year, June figures show institutional activity ahead by nearly N90 billion. Retail investors’ strongest month was May, with N337.46 billion in trades, but that was followed by a significant decline in June.

Analysts say the weakening of retail activity could be linked to inflationary pressures, which have reduced disposable incomes and discouraged small-scale investing. With inflation hovering above 22%, many households are prioritizing essentials over financial assets.

Institutional investors, including pension fund managers and asset management firms, are reportedly reallocating funds to shield returns from inflation and benefit from relatively attractive yields in select asset classes.

Market Growth vs Investment Quality

Despite a 61% year-on-year increase in turnover, concerns persist over the quality of investment inflows. Foreign investors, while active, appear more inclined to exit quickly after meeting profit targets, casting doubt on long-term stability. Market liquidity also seems to be increasingly concentrated within institutional hands, leaving retail participation vulnerable.

Speaking on the matter, Johnson Chukwu, Group Managing Director of Cowry Asset Management Limited, acknowledged the impact of global uncertainty but emphasized that foreign investors are still engaged in the Nigerian market.

“Foreign portfolio investors remain active, particularly in the money market, where they’re getting attractive yields,” Chukwu said. “In Q1 2025, capital importation data showed that of the $5.64 billion that entered Nigeria, over $5.2 billion was in portfolio investment—most of it directed toward treasury bills and OMO instruments.”

Chukwu noted that treasury bills were yielding up to 23–24% at one point, making them highly attractive to foreign investors. In contrast, Nigerian equities attracted just $117 million, likely due to concerns about valuation levels after a 40% market gain over the past year.

Olatunde Amolegbe, CEO of Arthur Stevens Asset Management and a former president of the Chartered Institute of Stockbrokers, echoed this view. He explained that foreign portfolio investors typically act with short-term objectives and are quick to exit once their targets are met.

“Many of them are traders at heart,” Amolegbe said. “They come in, take positions, and once they see profit, they exit. It doesn’t mean they won’t return. It’s a cycle. What comes in can go out and come back again.”

He added that the fixed-income market often acts as a gateway for foreign investments, with many investors eventually shifting to equities for better long-term returns—though the fixed-income space remains larger and more liquid.

Research analyst Dayo Adenubi also pointed out that many FPIs operate based on highly quantitative, short-term strategies, often through actively managed index funds. These funds, driven by the need to outperform benchmarks, tend to make rapid moves that can affect market liquidity and price discovery.

“They’re not here for the long haul,” Adenubi said. “They’re looking for alpha, and once they get it, they’re out. That’s just how the game is played.”