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Foreign investments in NSE hit N733bn in 2012

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Despite their exodus from the Nigerian capital market at the outset of the global financial crisis, foreign investors are staging a comeback, UDEME EKWERE writes

The total amount of foreign portfolio investment in the Nigerian Stock Exchange for the 11 months ended November 30, 2012 stood at N733bn.

The amount, which indicates the total inflow and outflow of FPI in the market from January to November 2012 is N114.86bn or 14 per cent lower than the N847.9bn recorded at the end of 2011.

Investigations by our correspondent at the NSE showed that the total inflow of FPI within the period under consideration stood at N419.50bn, representing a decline of 18 per cent or N93.22bn compared to the N512.72bn recorded at the end of 2011.

The total outflow between January and November 2012 was N313.55bn, representing a decline of N21.60bn or 6.4 per cent compared to the N335.15bn recorded in December 2011.

Foreign portfolio investments represent the passive holding of securities and other financial assets, which may not entail active management or control of the issuer. They are usually positively influenced by high rates of return and reduction of risk through geographic diversification.

The return on FPI is normally in the form of interest payments or non-voting dividends.

Confirming the level of FPIs to our correspondent on Thursday, the Chief Executive Officer, NSE, Mr. Oscar Onyema, said foreign investors had continually been showing interest in the Nigerian market due to the various reforms carried out in the Exchange in the last few years.

He said the reforms had impacted positively on the market and were attracting foreign investors, who look out for strong emerging markets where they could invest.

Onyema explained that the NSE was glad to note that there had also been increased participation by local investors, who had begun returning to the market after their huge exit following the global meltdown and the banking sector crisis in 2009.

He said, “Last year, the NSE recorded local participation of 44 per cent, while foreign participation accounted for 56 per cent of activities in the same year. The rally we saw in the market in 2012 was on the back of foreign investments.

“It is also good that our local investors have started to return to the market and we are very hopeful that we will see more of this in 2013. We at the Exchange are hopeful that the market will pick up further this year.

“It is important to state here that the Nigerian stock market has been cleaned up to give good returns to foreign investors and our market is too big to be ignored by foreign investors who are looking to take advantage of the opportunities offered by the African market and other emerging economies. This is what has kept these investors.”

The Chief Executive Officer, Proshare Nigeria Limited, Mr. Olufemi Awoyemi, said some foreign investors had been attracted by the exchange rates in the financial market. He, however, said the capital market regulators had the duty of ensuring more local investments in the market.

He said, “We can say that the exchange rate regime makes it attractive for foreign investors to move some of their portfolio into Nigeria at this point. However, government and the regulators have to do more to strengthen local participation in the market.

“If states cannot raise bonds because of the price/cost of government borrowings in the bond and treasury bills market, and if stockbrokers and retail investors cannot access margin or business loans to purchase stocks, then local participation cannot increase in the market.”

The Chief Responsibility Officer, Value Investing Limited, Mr. Seye Adetunmbi, said the fact that international investors expressed interest in the market was a good development.

According to him, for foreign investors to see the need to invest in a market shows that the market is recording improved activities and increased returns on investment.

Adetunmbi said, “Professionally and technically speaking, if foreign investors are interested in your stock market, it signals positive tiding, which means the market is performing and returning considerable competitive yield on investment, or at least, has the capacity of capital growth worth the investment criteria of international investors.

“It also depicts a safe investment haven, and in essence, it challenges the local players to explore the market better. Competition in an open market economy is healthy for the market.”

He added that the regulators were left with the function of ensuring that activities in the market were as they should, without any form of collaboration and manipulation of the prices of shares.

Adetunmbi said if the foreign interest in the Nigerian market was in response to good market fundamentals, there should not be cause for alarm, adding that most rational investors would not leave a safe investment haven on a sentimental note.


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