NGX: 2023 fears trigger flight to safety as foreign outflows hit N86bn in 4 months

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By Chinwendu Obienyi

With Nigeria’s two dominant political parties presidential primaries ahead of the 2023 elections, holding this week, foreign portfolio investments seem to be declining by the day as the Domestic and Foreign Portfolio Investment report of the Nigerian Exchange Limited (NGX) has revealed that outflows rose to N86 billion in four months of 2022.

This in turn has triggered foreign investors heading for the exit doors to hedge their investments into safer destinations due to the uncertainties that seem to becloud the nation’s impending general elections.

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Flight to safety is a financial market phenomenon occurring when investors sell what they perceive to be high-risk investments for  safer investments elsewhere.

The report which is prepared on a monthly basis by NGX Regulation Limited, with trading figures from market operators on their Domestic and Foreign Portfolio Investment (FPI) flows, revealed that total foreign inflows stood at N70.35 billion while domestic inflows stood at N378.51 billion in four months.

Similarly, domestic participation dwarfed foreign participation by 326 per cent as against 74 per cent, while total foreign transactions stood at N155.99 billion as against N742.09 billion recorded by total domestic transactions.

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Also, in the recently published April Consumer Price Index (CPI) report by the National Bureau of Statistics, headline inflation rose by 90 basis points to 16.82 per cent year-on-year (y/y) in April – its highest print in eight months.

The NBS maintained that during the review month, the increased price pressures primarily reflected the pass-through impact of higher global gas and energy costs as a result of the Russia-Ukraine crisis and increased food demand associated with the Ramadan and Easter festivities.

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In reaction to the NBS revelation, Nigeria’s stock market after impressive gains in three consecutive weeks, fell by 0.22 per cent while investors lost about N60 billion last week. This has sparked reactions from diverse sectors with analysts stating that with a number of factors like global uncertainty, insecurity challenges, inadequate infrastructures, unstable currency amongst others, foreign investors will continue to pull their investments away from Nigeria.

Speaking to Daily Sun, the Managing Director, Highcap Securities, David Adonri, explained that the build up to the 2015 general election was tumultuous, as heavy defection and the Boko Haram Insurgency led to equities falling 23.21 per cent in 2014 and further by 17.36 per cent because the outcome of the presidential election was unexpected and depressing for investors.