Foreign investors withdrew N420.37 billion from Nigeria’s equities market in the first quarter of 2025, a steep 251% increase over the N119.81 billion recorded during the same period in 2024, according to new data released by the Nigerian Exchange Group (NGX).
The sharp rise in capital outflows comes amid sweeping macroeconomic reforms by the Trump administration and heightened investor uncertainty, particularly around the Nigeria’s volatile FX market.
The increase in foreign exits, despite an uptick in inflows, underscores the unstable confidence in Nigeria’s long-term economic stability. Although foreign inflows also rose significantly—climbing by 322% from N93.37 billion in Q1 2024 to N393.68 billion in Q1 2025—the quarter ended with a net deficit of N26.69 billion. Total foreign portfolio transactions for the period surged to N814.05 billion, nearly four times the N213.18 billion recorded a year earlier.
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Foreign Trades Explode in March, Dominated by Block Transactions
Foreign interest reached an inflection point in March 2025, when trading by foreign investors accounted for 62.74% of the total N1.115 trillion in transactions. This was a dramatic rise from just 8.37% in February and 11.78% in January. The NGX attributes this surge to a spate of block trades—privately negotiated, large-volume transactions commonly executed by foreign institutional players.
According to the NGX’s Domestic and Foreign Portfolio Investment Report for March, both foreign inflows and outflows were almost identical—N349.97 billion and N349.92 billion, respectively—indicating a round-trip of capital rather than sustained investments.
In contrast, February had seen foreign inflows of only N18.05 billion and outflows of N24.60 billion, while January was only slightly higher with N25.66 billion in inflows and N45.85 billion in outflows.
This suggests that many foreign players may have entered the market with short-term positions, perhaps to exploit exchange rate volatility or capitalize on brief windows of naira stability before pulling out again.
March Pushes Total Transactions Above N1 Trillion
March 2025 marked a milestone for Nigeria’s capital markets, recording over N1 trillion in total equity transactions for the first time in the year—driven largely by foreign block trades. The total value of transactions hit N1.115 trillion, more than double February’s N509.47 billion and well ahead of January’s N607.05 billion.
Year-on-year, the figure is up 107.14% from N538.54 billion recorded in March 2024.
At the NAFEM official exchange rate of N1,536.82/$1 in March, the total volume translates to about $725.86 million—an increase from $341.36 million in February.
Domestic Investors Pull Back Amid Foreign Surge
Interestingly, domestic investors retreated in March despite the overall market rally. Total domestic trades declined 10.98% from N466.82 billion in February to N415.62 billion in March. January had seen stronger domestic activity at N535.54 billion.
Retail investors accounted for N197.12 billion in March, down from N214.51 billion in February and N267.35 billion in January. Institutional investors contributed N218.50 billion—also a drop from N252.31 billion in February and N268.19 billion in January.
While domestic investors still made up the majority of total Q1 2025 transactions, N1.41798 trillion or 63.53%, their share is declining. In Q1 2024, domestic trades accounted for a dominant 86.23% of total market activity.
A Shift in Market Dynamics
The data suggests a potential turning point in Nigeria’s capital market, with March 2025 being the first time in over a year that foreign trades surpassed domestic trades in monthly value. This shift aligns with Nigeria’s broader efforts to court international capital, including FX liberalization and interest rate hikes initiated in mid-2023.
Between 2007 and 2024, domestic investors dominated the Nigerian stock market. Domestic transactions grew from N3.556 trillion in 2007 to N4.735 trillion in 2024, while foreign trades increased more modestly from N616 billion to N852 billion. But March’s developments hint at a rebalancing—albeit one that might be temporary.
Despite the government’s push for liberal reforms, investor sentiment remains fragile. Exchange rate volatility continues to pose a risk. The naira depreciated from N1,492.49/$1 in February to N1,536.82/$1 in March, a trend that could discourage sustained foreign interest.
Meanwhile, inflation ticked up in March to 24.23%, reversing a brief slowdown to 23.18% in February following the Consumer Price Index rebasing. The rise was largely due to increases in food and transport prices, driven by higher logistics costs and FX pressures.
The inflation spike compounds the challenge for monetary policy authorities. Although the Central Bank of Nigeria has tightened interest rates to make local assets more attractive, the accompanying cost-of-living crisis and the naira’s instability complicate policy transmission.
Analysts believe the March surge in foreign transactions was driven by speculative capital rather than renewed long-term confidence. The near-equal inflows and outflows underscore a cautious strategy by foreign investors—entering when conditions appear favorable, only to exit quickly when risk levels rise.