Foreign investors divested N576.09 billion worth of equities from the Nigerian Exchange (NGX) between January and June 2025—an 84.97% increase compared to the N311.41 billion withdrawn during the same period in 2024.

This capital flight exceeded foreign inflows, which totaled N559.25 billion during the half-year period, resulting in a net foreign portfolio deficit of N16.84 billion. According to the NGX’s June 2025 Domestic and Foreign Portfolio Investment Report, foreign trading activity surged significantly year-on-year.

Cumulatively, foreign transactions rose to N1.14 trillion in the first half of 2025—more than double the N540.48 billion recorded in H1 2024. Economists attribute this uptick in capital outflows to factors including policy shifts in the U.S. under President Donald Trump and the attractive returns on Nigerian Treasury bills, which spurred foreign sell-offs.

On the domestic front, Nigerian investors accounted for N3.06 trillion worth of transactions, representing 72.92% of the total market activity. This reflects a 41.5% increase from the N2.17 trillion recorded in the same period last year. Institutional investors were responsible for N1.59 trillion of these trades, while retail investors contributed N1.47 trillion.

The data suggests relatively balanced participation between retail and institutional investors during the half-year period, though institutional activity has begun to gain dominance. In total, the Exchange recorded N4.19 trillion in transaction volume in H1 2025—a 60.98% increase from N2.60 trillion in H1 2024.

Despite the growth in market turnover, analysts have raised concerns about the quality of capital flow, particularly the spike in foreign divestments and the recent decline in retail investor participation. Monthly breakdowns show inconsistent investor behavior, with notable fluctuations in both foreign and domestic transactions.

In January, trading volume stood at N346.23 billion—comprising N269.39 billion in domestic trades and N76.84 billion in foreign trades. Retail and institutional domestic investments were nearly equal at N134.17 billion and N135.22 billion, respectively. By February, activity rose to N448.52 billion. Foreign inflows were N43.67 billion while outflows reached N47.93 billion, resulting in a mild net outflow. Institutional participation increased to N170.54 billion, while retail trades dipped to N123.38 billion.

March was the most active month, with total transactions surging to N1.29 trillion. This was largely driven by a spike in foreign inflows totaling N349.97 billion, the highest monthly inflow within the period. Outflows stood at N205.54 billion, leaving a net gain of N144.43 billion. Institutional domestic investments rose to N273.74 billion, while retail trades reached N212.77 billion.

April saw a sharp decline, with total transactions dropping to N487.39 billion. Foreign inflows slumped to N26.47 billion, while outflows climbed to N70.20 billion. Domestic retail and institutional investments dropped to N174.10 billion and N180.62 billion respectively. This downturn coincided with the announcement of a 14% tariff on Nigerian goods by the U.S. administration.

In May, outflows remained high at N60.94 billion, while inflows weakened to N24.12 billion. Institutional trades increased to N244.13 billion, and retail investments rose slightly to N337.46 billion. Total market activity stood at N700.50 billion.

June ended the half-year on a high note, with total transactions of N778.65 billion—the second-highest after March. Foreign inflows rebounded to N72.82 billion, while outflows eased to N66.49 billion, resulting in a net positive foreign position of N6.33 billion. Domestic institutional activity surged by 49.39% from May to N364.71 billion, while retail trades declined by 18.62% to N274.63 billion.

These trends reveal that foreign investment decisions remain sensitive to Nigeria’s foreign exchange liquidity and policy direction. The naira’s appreciation to N1,529.71/$1 at the NAFEM window in June, up from N1,586.15/$1 in May, may have contributed to the modest rebound in foreign inflows. Nevertheless, the sustained outflows highlight ongoing concerns about repatriation challenges and policy uncertainty.

Over the past few months, institutional investors have consistently outpaced retail participants. From March onward, institutional activity began to dominate. By June, the gap had widened to N90 billion, with institutional trades at N364.71 billion compared to N274.63 billion in retail trades. Retail participation had peaked in May at N337.46 billion before declining in June—likely due to inflationary pressures reducing disposable income available for investment.

With inflation remaining above 22%, more households are prioritizing essential spending over investing or saving. Conversely, institutional investors—such as pension funds and asset managers—are actively rebalancing their portfolios to hedge against inflation and capitalize on relatively higher returns.

Although market turnover increased by 61% year-on-year, experts note that the shift in investor composition raises questions about long-term sustainability. Foreign investors, though active, remain cautious—evidenced by persistent outflows. Meanwhile, the dominance of institutional players suggests that market liquidity is becoming concentrated among a limited number of participants.

Retail investors, vital for fostering market resilience and depth, appear to be retreating amid economic headwinds.

Expert Insights

Financial analyst Johnson Chukwu emphasized that while U.S. policy inconsistency under President Trump has played a role, foreign portfolio investors remain deeply involved in Nigeria’s financial markets.

Citing capital importation figures from Q1 2025, he noted that foreign portfolio investment made up the bulk of the $5.64 billion inflows into Nigeria, with $5.20 billion funneled into money market instruments such as Treasury bills and Open Market Operations (OMO). He pointed out that, until recently, these instruments offered yields as high as 23–24%, making them attractive to foreign investors. In contrast, only $117 million of the total portfolio inflows went into equities.

Chukwu, who serves as Group Managing Director of Cowry Assets Management Limited, added that the weak appetite for equities may be due to perceived overvaluation. “The market has gained over 40% in the last year despite minimal changes in economic fundamentals. Foreign investors might feel equities are overpriced.”

Similarly, Olatunde Amolegbe, Managing Director/CEO of Arthur Stevens Asset Management Limited, described foreign portfolio investors as profit-driven traders. “They take positions with the aim of making profit. Once that goal is met, they exit—often temporarily.”

He added that foreign portfolio investment trends should be evaluated in full context, as outflows typically follow inflows. According to him, the equities market is currently outperforming the fixed income space, with a year-to-date return of about 40% on the NGX.

Amolegbe further explained that foreign investors often enter through the fixed income market before transitioning to equities, due to its relative safety and size. “The fixed income market offers more instruments to absorb large inflows than the equity market, which has a smaller capital base,” he said.

Research analyst Dayo Adenubi echoed these sentiments, explaining that foreign portfolio investors are typically short-term in nature and rely on data-driven strategies. Many operate through actively managed index funds under pressure to outperform benchmarks and maximize investor returns.

“They use complex quantitative models and are focused on liquidity and short-term gains,” Adenubi said. He added that their activity helps improve price discovery and market liquidity, even if it sometimes introduces volatility.