Nigeria’s foreign portfolio investments (FPIs) status has witnessed a major turnaround with yearly inflows outweighing outflows for the first time in five years.
The latest annual trading data on FPI showed that foreign investors bought more Nigerian stocks than they sold last year, reversing the negative trend that started in 2018. FPI transactions ended 2022 with a surplus of N12.29 billion, as against a deficit of N24.74 billion recorded in 2021.
Nigeria recorded an FPI deficit of N234.66 billion in 2020, about 125 percent increase on N104.3 billion recorded in 2019. The country had slipped into negative with FPI deficit of N66.3 billion in 2018.
The FPI report, coordinated by the Nigerian Exchange (NGX), included transactions from nearly all custodians and capital market operators and it is widely regarded as a credible measure of FPI trend. The report uses two key indicators-inflow and outflow, to gauge foreign investors’ mood and participation in the equities market and the economy.
While inflows and outflows indicate direction of portfolio transactions, total FPI measures the momentum and level of participation. When inflows outweigh outflows, it simply means foreign investors are buying more quoted equities than they are selling and when outflows outpace inflows, it implies that foreign investors are selling more of their investments than buying more investments.