The Nigerian Exchange Limited (NGX) recorded a sharp decline in trading activity in February 2025, with total transactions dropping by 16.07% to N509.47bn, down from N607.05bn in January, according to the Domestic and Foreign Portfolio Investment Report released on Monday.

The downturn was primarily driven by a 40.36% reduction in foreign investor participation, as their total transactions fell from N71.51bn in January to N42.65bn in February.

Foreign Investors Retreat Amid Market Uncertainty

The report revealed that foreign inflows dropped by 29.67%, decreasing from N25.66bn to N18.05bn, while foreign outflows saw a steeper decline of 46.33%, falling from N45.85bn to N24.60bn.

This reduction in foreign activity lowered their share of total market transactions to 8.37%, down from 11.78% in January. The figures reflect growing concerns about investor confidence and macroeconomic stability in Nigeria, despite efforts by the Central Bank of Nigeria (CBN) to stabilize the naira.

Domestic Investors Maintain Market Dominance

Domestic investors remained the dominant force, accounting for 91.63% of total transactions. However, their trading volume also declined by 12.83%, from N535.54bn in January to N466.82bn in February.

A breakdown of domestic transactions showed that:

• Retail investors contributed N214.51bn, reflecting a 19.76% decrease from N267.35bn.
• Institutional investors accounted for N252.31bn, a 5.92% decline from N268.19bn.

Year-to-Date Performance and Long-Term Trends

Total transactions for the first two months of 2025 amounted to N1.12tn, with domestic investors contributing N1tn (89.78%) and foreign investors accounting for N114.16bn (10.22%).

Despite the month-on-month decline, overall market activity in the first two months of 2025 increased by 10.62% compared to N1.01tn recorded during the same period in 2024. However, foreign participation has continued to shrink, declining from 11.78% in 2024 to 10.22% in 2025.

Historical data shows a steady increase in domestic participation over the past 18 years, rising by 33.15% from N3.56tn in 2007 to N4.73tn in 2024. Foreign transactions also grew by 38.31% during the same period, from N616bn to N852bn, although their share remains relatively low, averaging 15% of total market activity in 2024.

Outlook and Investor Sentiment

The continued withdrawal of foreign capital from the Nigerian stock market underscores lingering investor uncertainty, particularly as foreign investors pulled N455.62bn out of the market in 2024, surpassing total inflows.

Analysts warn that without clear policy measures to restore confidence, including currency stability and regulatory transparency, foreign participation may continue to decline, leaving the market increasingly reliant on domestic investors.