The Nigerian Exchange Limited (NGX) has reported a 35.7% decline in total transactions in April 2024 compared to March 2024. The total value traded dropped from N538.54 billion to N346.23 billion.
This decline may be due to investor sentiment and recent volatility in the Nigerian market. The NGX All-Share Index experienced a significant drop in April, losing N3.57 trillion in market value following policy announcements by the Central Bank of Nigeria (CBN) that favored fixed-income securities.
A closer look at the data reveals a contrasting trend between domestic and foreign investors. Domestic transactions decreased by a sharper 49.27% from March to April. Foreign transactions saw a surprising 28.19% increase during the same period. This implies that although overall activity dipped, foreign investors may be finding the Nigerian market attractive again.
The NGX report also shows a difference in activity between institutional and retail investors. Institutional investors outperformed retail investors by 10% in April. Retail transactions specifically saw a steeper decline of 54.89% compared to March.
What is the implication on the long-term market performance?
While April’s activity saw a dip, the NGX report provides a broader perspective by comparing it to a 16-year period. Over this timeframe, domestic transactions decreased by 10.94%, while foreign transactions fell by 33.28%. This trend implies a persistent decrease in domestic and foreign investor participation, which could affect market liquidity and overall market performance.
The CBN’s recent policies appear to be influencing investor behavior. Recall that the CBN announced the new bank recapitalization plan and a 200 basis point hike in the benchmark interest rate by the Monetary Policy Committee. The substantial rate hike triggered sell-offs, leading to a 6% drop in the NGX All-Share Index, which closed below the 100,000-point mark for the first time since March 2024.
While activity decreased in April, the rise in foreign investment offers a positive sign. The CBN has taken several measures to improve its market conditions, including currency management policies and financial sector reforms. Investors will have to closely monitor the impact of recent CBN policies on overall market stability in the coming months.
