More Retail Participation Needed as Foreign Investors Exit Stocks

The Nigerian Stock Exchange (NSE)  and the Securities and Exchange Commission (SEC) need to do more so as the deepen the participation of retail investors in the Nigerian stock market as foreign participation continues to decline.
Equities transactions figures released by the NSE for the month of January and February, 2016 showed that foreign portfolio investors (FPI) decreased. While total transactions on the bourse increased from N84.10 billion in N117.27 billion, FPI fell 51.57 per cent to 36.48 per cent of the transactions.
According to the NSE, monthly foreign outflows outpaced inflows, which was consistent with the same period in 2015.

“Foreign outflows increased by 20.79 per cent from N26.36 billion in January 2016 to N31.84 billion while foreign inflows decreased by 35.68 per cent from N17.01 billion in January 2016 to N10.94 billion in February 2016,” NSE said.
A further analysis of the total  transactions at the nation’s bourse indicates that while there was an  increased by 39.44 per cent  from N84.10 billion recorded in January 2016 to N117.27 billion in February 2016, the performance was a decrease of 36.44 per cent compared with the N184.49 recorded in February 2015.

The exit of the foreign investors has led to an increase in domestic investors, rising by 27.04 per cent compared to foreign participation.  Domestic transactions increased from 48.43 per cent in January 2016 to 63.52 per cent in February 2016 while foreign investors  transactions decreased from 51.57 per cent  to 36.48 per cent over the same period.
The total domestic transaction increased by 82.89 per cent from January to February 2016. The institutional composition of the domestic market increased by 75.05 per cent from N21.85 billion in January to N38.25 billion in February while the retail composition increased by 91.95 per cent from N18.88 billion in January to N36.24 billion in February 2016.

In all, retail investors still account for 47 per cent, while institutional investors account for 53 per cent.  Out of the N115.22 billion domestic transactions, institutional investors account for N60.10 billion, while N55.12 billion.
Market operators and analysts had said for the market to witness relative stability and get more depth, regulators and all other stakeholders must work to increase the domestic participation.
Although the NSE has been holding investor clinic, since 2012, some shareholders said the strategy has not yielded the desired results and should be changed.
When the investor clinic started in 2012, the NSE brought resource persons from Morgan Stanley as well as leading capital market experts within the country.

The Chief Executive Officer of the NSE, Mr. Oscar Onyema had said: “That the management of the exchange came out with the idea because it is cognisant of the fact that confidence of the retail investors in the market is at low ebb now as most of them are yet to recover from the losses they suffered during the recent burst.”

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