Gains Of Economic Reforms Drive Foreign Investors Back With N1.18trn Equities Inflows

…Recapitalisation Rally Drawing Offshore Investors To Nigerian Banks—Experts

Foreign portfolio investors injected N1.18trn into Nigeria’s equities market between January and November 2025, marking a 218.9 per cent surge from the N370.01bn recorded in the corresponding period of 2024, according to the Nigerian Exchange (NGX) Foreign Portfolio Investment (FPI) report obtained by THE WHISTLER.

The sharp rise underscores a renewed appetite for Nigerian stocks by offshore investors, even as the economy continues to grapple with macroeconomic volatility, foreign exchange pressures and global uncertainties.

Market analysts attribute the strong inflows to relatively attractive valuations of blue-chip stocks, improved market liquidity and gradual stabilisation in key macroeconomic indicators.

However, the rebound in foreign interest was accompanied by a significant rise in capital outflows. Data from the NGX showed that foreign portfolio outflows climbed to N1.01trn during the 11-month period, representing a 143.3 per cent increase from N415.13bn recorded a year earlier.

Despite the elevated exit levels, inflows exceeded outflows by about N170bn, reflecting sustained, though cautious, confidence among foreign investors in Nigeria’s capital market.

Analysts say the near-balance between inflows and outflows highlights a market characterised by active portfolio rebalancing rather than outright capital flight, as investors respond to evolving domestic and global conditions.

At the transactional level, total activity on the Nigerian Exchange eased slightly in November 2025. Overall market transactions declined by 5.95 per cent month-on-month to N971.2bn in November, from N1.03trn in October 2025. Nevertheless, when compared with November 2024, total transactions rose sharply by 119.56 per cent from N442.34bn, underscoring the strong year-on-year expansion in market activity.

Domestic investors continued to dominate trading on the Exchange. In November 2025, the value of transactions executed by domestic investors exceeded those of foreign investors by approximately 66 per cent.

A month-on-month comparison showed that total domestic transactions dipped marginally by 4.35 per cent to N809.14bn in November from N845.96bn in October. Over the same period, foreign transactions declined more steeply by 13.17 per cent, falling to N162.04bn from N186.62bn.

Within the domestic segment, institutional investors maintained their lead over retail participants. Institutional transactions outperformed retail trades by about 32 per cent in November.

While retail transactions fell by 16.21 per cent to N277.93bn from N331.71bn in October, institutional transactions edged up by 3.30 per cent to N531.21bn, reflecting sustained participation by pension funds, asset managers and other large investors.

Longer-term data highlights the growing role of the capital market in Nigeria’s financial system. Over an 18-year period, domestic transactions expanded by 33.15 per cent from N3.56trn in 2007 to N4.74trn in 2024, while foreign transactions rose by 38.31 per cent from N616bn to N852bn.

In 2024, domestic investors accounted for about 85 per cent of total market transactions, with foreign investors contributing the remaining 15 per cent.

Provisional data for 2025 indicate a significant scale-up in activity, with total domestic transactions estimated at about N8.35 trillion, while foreign transactions stood at approximately N2.19trn.

The Central Bank of Nigeria (CBN) recently expressed optimism that the bullish momentum in the capital market will extend into 2026, supported largely by the ongoing banking sector recapitalisation programme, rising investor confidence and supportive policy measures.

In its latest outlook, the apex bank noted that the recapitalisation exercise scheduled for completion by the end of the first quarter of this year—has boosted trading activity and attracted fresh equity inflows.

The CBN also cited improved macroeconomic stability, clearer regulations and enhanced foreign exchange liquidity as factors driving stronger participation by both domestic and foreign investors. However, it cautioned that the dominant role of the banking sector could heighten concentration risks, warning that prolonged capital raising by banks may lead to investor fatigue and crowd out issuers from other sectors.

Despite these risks, the apex bank said initiatives such as the NGX’s technology-driven strategy, collaboration with the Federal Ministry of Industry, Trade and Investment, zero per cent capital gains tax for small businesses and a N150m capital gains tax exemption for retail investors are expected to broaden market participation.

The CBN added that global economic uncertainties remain a key downside risk, noting that unexpected external shocks could weaken investor confidence and disrupt the current bullish trend in Nigeria’s capital market.

The Group Managing Director, Crane Securities Limited, Mr. Mike Eze reacting to the development, said the scale of foreign inflows signals a cautious but deliberate return of offshore investors to Nigerian equities.

“A 219 per cent jump in inflows to N1.18trn is significant, especially given lingering FX and macro risks. What is notable is that inflows still exceeded outflows, suggesting investors are positioning selectively rather than exiting wholesale. Blue-chip banking and telecom stocks remain the primary beneficiaries,” he said.

According to Eze, the rise in both inflows and outflows reflects active portfolio rebalancing rather than speculative hot money.

“Foreign investors are clearly trading the market. While outflows rising to over N1trn shows caution, the net positive position confirms that reforms around FX liquidity and market transparency are beginning to restore confidence. Sustaining this trend will depend on policy consistency and macro stability in 2026,” he noted.

An Economist, Mr. Jide Bello said the inflow data aligns with the improving depth of Nigeria’s capital market but warned against overreliance on the banking sector.

“The recapitalisation-driven rally has attracted foreign funds, but it also increases concentration risk. If earnings or capital-raising fatigue sets in, sentiment could shift quickly.

Broadening sectoral participation will be key to turning these inflows into long-term investment rather than short-term trades,” he said.