Will Foreign Investors continue patronage of the Nigerian Market in 2014?
Category: Capital Market
Tuesday, 07 January 2014 05.294AM / The Analyst
The Nigerian economy has so far recorded increased growth in its domestic economy, showing signs of sustained and substantial improvement in the economy. Despite this number, muted by the growing challenge of wealth inequality, concerns continue to linger as to whether foreign investors would continue to patronise the Nigerian market. The answer must be WHY NOT?
Foreign investors are known to invest in growing businesses as well as growing economies, and Nigeria being a frontier/growing economy opens up opportunities for investors both domestic and foreign to participate fully and grow their investments compared to returns from other similar type markets.
The proof is evident in a recent released by the Nigerian Bureau of Statistics (NBS) which revealed that the Nigerian economy has been growing at an average of 6% in 2013; the Gross Domestic Product (GDP) grew by +6.56% and +6.18% in Q1 and Q2 2013, respectively; growing further to 6.81% in Q3, with a projected growth of +7.7% at the end of Q4 2013.
Even if you mitigate against oil price movements, it is undisputable that the reforms initiated and pursued by the government and her agencies in 2013, are expected to impact the economy positively in 2014. Nigeria is also expected to have competitive edge in the international capital market in 2014, owning to robust growth, high reserves level, stable exchange rate and clement investment climate.
A look into the domestic/foreign investors’ participation profile for year ended 2013 showed that Foreign Portfolio Investments on the Nigerian bourse increased in 2013. Foreign participation which represents about 36.89% of the total transaction consummated as at January 2013 gradually increased to an aggregate figure of 51.43% as at October 2013, while domestic investors’ participation which was recorded at 63.11% in January dropped to 48.57% in October 2013.
A recap of historical trends shows that foreign investors accounted for 14.8% of total transaction in 2007 and consistently increased to 61.4% in 2012, while the participation of local investors shrunk from 85.2% in 2007 to 38.6% in 2012.
It is therefore an informed position to expect that foreign investors will continue to patronise the Nigerian Market, as the key initiatives of the NSE Management remains geared towards driving and sustaining optimistic sentiments in 2014.