The recent policy reforms implemented by the present administration in Nigeria have had a significant impact on the country’s Foreign Portfolio Investments (FPIs), according to a report released by the Nigerian Exchange (NGX).
TechEconomy understands that the reforms, which included the removal of the petrol subsidy and the abolition of multiple foreign exchange windows, have led to a notable turnaround in the FPI landscape.
The report indicated that the total foreign transactions rose by an impressive 70.1 percent in the second quarter of 2023 compared to the first quarter, mainly driven by a staggering 197.5 percent increase in FPI inflows.
This positive development reflects a shift from the previous trend of more outflows than inflows, resulting in a significant improvement in FPI net status, which changed from a deficit of 49 percent in the first quarter to a surplus of 43.9 percent in the second quarter.
The period ending in May 2023 showed all-positive marks for the investment market, as both foreign and domestic investors increased their transactions.
The total FPIs in May reached its highest level since June 2022, signaling renewed interest in the Nigerian market after a period of anxieties related to the political transition.
The driving force behind this remarkable performance was the recovery in foreign interest that started in May and continued into June. Domestic investors also participated enthusiastically in the market during this period.
The reforms appear to have instilled confidence in investors, leading to an increase in FPI inflows and a decrease in outflows.
The second quarter saw a notable surge in total FPI transactions, rising from N53.71 billion in the first quarter to N91.37 billion. FPI inflows tripled from N18.12 billion in the first quarter to N53.9 billion in the second quarter.
On the other hand, FPI outflows, which had outpaced inflows in the first quarter, became less significant at N37.47 billion in the second quarter against an inflow of N53.9 billion.
The report’s month-on-month analysis indicated a continuous positive trend, with total transactions at the NGX rising by 26 percent from N322.92 billion in May 2023 to N406.75 billion in June 2023.
Foreign transactions also increased by 23 percent during the same period. Domestic transactions remained upbeat, showcasing a rise from N285.76 billion in May to N361.0 billion in June 2023.
Prior to these positive developments, Nigeria faced a forex crisis in April 2023, primarily attributed to a dearth of foreign inflows.
However, the recent surge in FPIs suggests that the policy reforms undertaken by the Tinubu administration have been instrumental in attracting foreign investments and easing the forex situation.
