Local investors outshined foreigners in 2020 stock deals

…account for N1.44trn worth of transactions

Out of a total N2.168 trillion worth of equities traded on the Nigerian Stock Exchange ( NSE) in 2020, only N729.20 billion or 33.63 percent was by foreigners while N1.44 trillion or 66.37 percent was accounted for by local investors, according to NSE data on domestic and foreign portfolio participation in equity trading.

The N2.168 trillion worth of stocks traded in 2020 was pretty higher than 2019 when it was N1.928 trillion. Foreigners had in 2019 exchanged stocks worth N942.55 billion or 48.88 percent, while local investors traded N985.53 billion worth of equities or 51.11 percent.

In 2019, foreign inflow in stocks was N419.13 billion while outflow was N523.42 billion. Local retail investors had in 2019 traded stocks worth N477.34 billion leaving stock transaction worth N508.17 billion for their institutional counterparts.

Over a fourteen (14) year period, domestic transactions decreased by 59.54percent, from N3.556 trillion in 2007 to N1.44 trillion in 2020 while foreign transactions increased by 18.45 percent, from N616 billion to N729 billion over the same period.

Though in 2020, foreigners brought in only N247.27 billion they invested in Nigeria’s stock market but they took away N481.93 billion from the market.

While the value of equities transactions by local retail investors in 2020 was N618.75 billion, their institutional counterparts traded stocks worth N820.14 billion in 2020.

On a monthly basis, the Nigerian Stock Exchange polls trading figures from market operators on their Domestic and Foreign Portfolio Investment (FPI) flows.

As at December 31, 2020, total transactions at the nation’s bourse decreased by 15.28percent from N317.81billion (about $813.87million) in November 2020 to N269.24 billion (about $687.06million) in December 2020.

The performance of December 2020 when compared to the performance in December 2019 (N127.94billion) revealed that total transactions increased by 110.44 percent. In December 2020, the total value of transactions executed by Domestic Investors outperformed transactions executed by foreign investors by about 48 percent.

Further analysis of the total transactions executed between December 2020 and preceding month (November 2020) revealed that total domestic transactions decreased by 20.43 percent from N250.50 billion in November to N199.32 billion in December 2020.

However, total foreign transactions inc reased by 3 . 8 8 p e rcent from N67.31billion ( about $ 172.38million) to N69.92billion ( about $ 178.44million) between November and December 2020.

In December 2020, institutional Investors outperformed retail investors by 38percent. A comparison of domestic transactions in December 2020 and prior month ( November 2020) revealed that retail transactions decreased by 42.45percent from N106.38 billion in November 2020 to N61.22 billion in December 2020.

Also, the institutional composition of the domestic market decreased by 4.18percent, from N144.12 billion recorded in November 2020 to N138.09 billion in December 2020.

Mozambique is harvesting the gains of having clear legal and fiscal frameworks that drive transparency and attract foreign investors as Nigeria’s Petroleum Industry Bill’s (PIB) journey into law remains uncertain after it was first initiated about 20 years ago.

Multinationals, including Total, Mitsui, ONGC, PTTEP, Eni and Exxonmobil have already invested more than $20 billion in Mozambique. Last August, 68 new U.S. companies signed engineering, procurement and construction contracts to supply equipment and services to the landmark Mozambique liquefied natural gas (LNG) gas-processing facility, with individual contracts reaching $1.8 billion.

Saipem and Subsea 7 inked a major contract for subsea work on the offshore Mamba Area 4 project, which is on track to feed gas from the field into the Rovuma liquefaction trains, with a final investment decision expected later this year.

The influx of capital into Mozambique is supported by the country’s relatively attractive contractual terms, characterised by a public bidding process, limited government involvement and preference granted to local entities. Hydrocarbon activity in Mozambique is governed by the Petroleum Act, which serves to promote competitiveness and transparency within the sector, while protecting national interests and driving state participation through Empresa Nacional de Hidrocarbonetos (ENH).

“Mozambique defied global investment flows by reporting a rise in deal activity in 2020. Now, the country seeks to engage local service providers to supply goods and services to gas megaprojects to drive in- country value generation and retention,” Grace Goodrich, field editor at Africa Oil & Power said.

While overall transactions dropped by eight percent in sub-saharan Africa in 2020, in Mozambique, the number of transactions rose, with 12 deals reported compared to only four deals in 2019, according to a Baker Mckenzie analysis.

Despite on-going market uncertainty due to COVID-19, for Mozambique, this comes as little surprise: in recent years, the country has emerged as a regional hub for energy investment and development on the continent, as foreign investors spearhead gas megaprojects and local service providers seek to access large-scale contracts.

In 2021, deal activity in Mozambique and on the continent is expected to increase, as the sector continues to recover from COVID-19 and foreign direct investment begins to flow.