Capital flight soars as foreign investors withdraw N420bn from NGX

By Chinwendu Obienyi

Foreign investors withdrew a staggering N420.37 billion from the Nigerian equities market in the first quarter of 2025, representing a 251 per cent increase compared to N119.81 billion recorded in Q1 2024, Daily Sun investigations reveal.

The exodus, the sharpest in recent memory, underscores mounting investor anxiety amid ongoing economic reforms and persistent exchange rate instability.

Despite government efforts to attract foreign capital through FX liberalization and interest rate hikes, investor behavior remained erratic, especially in March, which saw foreign trades dominate the market for the first time in over a year.

Daily Sun had earlier reported that foreign transactions jumped to N699.89 billion, up 1,541 per cent from N42.65 billion in February. The surge was driven by block trades—large, privately negotiated deals often conducted by foreign institutional investors—signaling short-term speculative moves rather than long-term commitments.

According to the NGX’s Domestic and Foreign Portfolio Investment Report for March 2025, foreign investors accounted for 62.74 per cent of total market turnover in March, a sharp contrast to just 8.37 per cent in February. Foreign inflows and outflows were nearly equal, at N349.97 billion and N349.92 billion respectively, pointing to a high-volume, liquidity-driven round-trip.

In total, Q1 2025 foreign transactions hit N814.05 billion, a 282 per cent year-on-year increase from N213.18 billion in Q1 2024. Inflows rose 322 per cent to N393.68 billion, yet the quarter closed with a net deficit of N26.69 billion, reflecting sustained risk aversion.

Meanwhile, domestic participation weakened. Total domestic transactions fell to N415.62 billion in March, down 10.98 per cent from February, as retail and institutional investors reduced their exposure. Year-to-date, domestic trades stood at N1.42 trillion, down in momentum from the N1.33 trillion recorded in Q1 2024.

The shift marks a notable rebalancing in the equities market. While domestic investors have historically dominated—with an 86.23 per cent market share in Q1 2024—their portion dropped to 63.53 per cent in Q1 2025, as foreign investor influence swelled.

March became the first month in over a year to cross N1 trillion in total transaction value, hitting N1.115 trillion, more than double February’s volume. In dollar terms, using the March NFEM exchange rate of N1,536.82/$1, this equates to approximately $725.86 million.

Analysts warn that while the uptick in foreign activity may suggest renewed interest, it more likely reflects speculative positioning tied to FX arbitrage opportunities. The Managing Director, Crane Securities, Mike Eze noted that the flows are not necessarily a vote of confidence.

Eze said, “The market is information and this situation just reflects how sensitive our markets have become to external currency moves and institutional timing. March was extraordinary but whether Q2 2025 builds on that or unwinds it remains to be seen.”

Nigeria’s macroeconomic backdrop remains challenging. Headline inflation rose to 24.23 per cent in March, reversing February’s post-CPI rebasing dip. The naira also weakened during the month, sliding from N1,492.49/$1 to N1,536.82/$1, fueling concerns over the sustainability of inflows.

As the Central Bank of Nigeria continues its reform agenda, market observers say policy clarity, FX stability, and inflation control will be crucial in restoring longer-term investor confidence.