Foreign investor activity on the Nigerian Exchange Limited showed signs of life in February, but the underlying signal remains one of caution, with capital exits still exceeding inflows despite a notable rebound in participation.
The latest Domestic and Foreign Portfolio Investment Report shows foreign inflows rose sharply by 39.39% to N66.71 billion, suggesting a tentative return of offshore interest after a weak start to the year. Yet that optimism was tempered by a continued rise in outflows, which climbed 9.12% to N72.32 billion, leaving a net outflow of N5.61 billion.
While narrower than January’s N18.42 billion net exit, the February figure extends a pattern that has defined Nigeria’s equities market in recent years: foreign investors are willing to trade, but remain reluctant to stay.
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The dual increase in inflows and outflows points to a market driven more by short-term positioning than long-term conviction. Analysts say part of the inflow rebound likely reflects bargain hunting as equity prices adjust, alongside tactical allocations aimed at capturing yield in a high-interest-rate environment. However, the persistence of outflows indicates that many investors continue to take profits quickly or reduce exposure at the first sign of volatility.
In absolute terms, foreign participation is rising, with total transactions increasing 21.81% to N139.03 billion. But in relative terms, its footprint is shrinking. Foreign investors accounted for just 9.01% of total market activity in February, down from 13.24% in January — a reminder that the market’s recent surge has been overwhelmingly domestic in origin.
Total turnover on the exchange jumped 78.93% to N1.542 trillion, driven almost entirely by local investors. Institutional players led with N854.83 billion, while retail participation stood at N548.50 billion. Combined, domestic investors accounted for more than 90% of all transactions, reinforcing their role as the market’s primary source of liquidity.
This dominance has become structural. Over time, Nigeria’s equities market has evolved into one largely sustained by local capital, partly due to recurring bouts of foreign investor retreat triggered by currency instability, inflation, and policy uncertainty. While this has insulated the market from abrupt external shocks, it has also limited the depth and diversity of capital flows.
The year-to-date numbers reinforce that trend. Foreign inflows totaled N114.57 billion in the first two months of 2026, compared with outflows of N138.60 billion, resulting in a net exit of N24.03 billion. Foreign participation accounted for just 10.53% of overall transactions, dwarfed by domestic activity at 89.47%.
Behind these figures lies a familiar set of concerns. Currency risk remains at the forefront. For foreign investors, returns in naira terms can be quickly eroded by exchange rate depreciation, making the timing of entry and exit critical. Questions around liquidity in the foreign exchange market and the ease of repatriating funds continue to weigh on sentiment.
At the same time, elevated inflation and tight monetary conditions complicate the outlook. While higher interest rates can attract yield-seeking capital, they also signal underlying economic stress and can dampen corporate earnings, limiting the appeal of equities.
From the analysts’ perspective, February’s data suggests that some investors are willing to test the waters, but not yet commit fully. The improvement in inflows points to selective confidence, possibly tied to specific sectors or undervalued stocks. However, the continued rise in outflows indicates that broader concerns about macroeconomic stability remain unresolved.
The sharp increase in total market turnover adds another layer to the picture. It is seen as a reflection of strong domestic engagement, but also hints at increased trading activity rather than sustained investment—a dynamic that can amplify volatility if sentiment shifts.
For the market to attract durable foreign capital, analysts say a clearer policy framework will be essential, particularly around exchange rate management and inflation control. Stability in these areas would reduce the risk premium currently attached to Nigerian assets and encourage longer-term allocations.
However, foreign investors appear content to engage opportunistically rather than strategically — stepping in when valuations are compelling, but stepping out just as quickly when risks resurface. Currently, the Nigerian market is thriving on the strength of domestic participation, even as it waits for a more decisive return of foreign capital.