Foreign Portfolio Investment (FPI) net capital outflow from the Nigerian equities market widened by more than 1,073 per cent in three years, rising from N22.68 billion in the first seven months of 2023 to N266.07 billion by July 2026, as foreign investors took more money out of the market than they brought in.
Vanguard’s findings from the latest data released by the Nigerian Exchange Limited (NGX) showed that FPI remained in net outflow territory throughout the period under review, with the gap between inflows and outflows widening significantly in 2026.
Year-to-date (YtD) July 2023, foreign investors brought N81.47 billion into the NGX, against an outflow of N104.15 billion, resulting in a net outflow of N22.68 billion.
By YtD July 2024, the net outflow had almost tripled to N64.72 billion, as inflows increased to N266.64 billion, but outflows climbed faster to N331.36 billion.
In YtD July 2025, foreign inflows rose substantially to N609.73 billion, while outflows increased to N671.56 billion, leaving a net outflow of N61.83 billion.
The situation deteriorated sharply in 2026. Between January and July, foreign investors recorded N513.36 billion in inflows, compared with N779.43 billion in outflows, resulting in a net outflow of N266.07 billion.
Compared with YtD July 2023, foreign inflows in 2026 increased by more than 530 per cent, while outflows rose by about 648 per cent.
Analysts said the trend suggests that the challenge facing the Nigerian equities market is no longer simply attracting international capital, but retaining it once it enters the market.
They attributed the widening gap to factors including profit-taking, portfolio rebalancing and continued caution over Nigeria’s macroeconomic and investment environment.
2026 records sharp deterioration
The N266.07 billion net outflow recorded by July 2026 was more than four times the N61.83 billion recorded in the corresponding period of 2025 and about 11.7 times the N22.68 billion recorded in 2023.
The development occurred despite a strong expansion in overall trading activity on the NGX. Total transactions reached about N11.98 trillion in the first seven months of 2026, almost twice the N6.01 trillion recorded in the corresponding period of 2025. The increase, however, was driven largely by domestic investors.
Monthly data showed that foreign outflows exceeded inflows in every month between January and July.
January recorded inflows of N47.86 billion against outflows of N66.28 billion, resulting in a deficit of N18.42 billion.
In February, inflows rose 39.4 per cent month-on-month to N66.71 billion, while outflows increased 9.1 per cent to N72.32 billion. The deficit narrowed to N5.61 billion.
March recorded the largest movement, with inflows jumping 60.5 per cent to N107.05 billion. However, outflows surged 151.3 per cent to N181.77 billion, producing the year’s highest monthly deficit of N74.72 billion.
In April, inflows fell 15.1 per cent to N90.84 billion, while outflows declined 13.7 per cent to N156.94 billion, resulting in a deficit of N61.10 billion.
May provided temporary relief as inflows fell marginally to N87.60 billion, while outflows plunged 38.8 per cent to N96.01 billion, narrowing the deficit to N8.41 billion.
The improvement was reversed in June. Outflows rose 19.9 per cent to N115.08 billion, while inflows declined 18.1 per cent to N71.71 billion, widening the deficit to N43.37 billion.
July recorded the weakest monthly inflow of N41.59 billion, down 42 per cent from June. Outflows fell 20.9 per cent to N91.03 billion, leaving a deficit of N49.44 billion.
Reacting to the net inflow, David Adonri, Managing Director, Highcap Securities Limited, said Nigeria still needed greater participation by foreign investors because of its multiplier effects on the economy.
He said: “In the world of investment, the more the merrier. Notwithstanding the dominance of local investors in a domestic capital market, the economy still needs increasing participation of foreign investors (Foreign Direct Investment, FDI and Foreign Portfolio Investment, FPI) because of the multiplier effects.
“Following several past reforms, Nigerian institutional investors, especially PFAs, now have the capacity to satisfy the liquidity needs of the market. This, they achieve easily because of the shallow depth of the capital market.
“It may also not mean that the participation of foreign investors in the Nigerian capital market has diminished in aggregate terms, but comparatively in percentage. The surge in local investment may have watered down foreign participation.”
Adonri said the large outflows could partly reflect the recycling of foreign funds through the market to harvest profits and dividends.
“As a result of the rally in equities, which was sustained over a long period, the unimaginable profitability of investment delivered extraordinary returns which many foreign investors may have been repatriating.
“Within the period also, the Central Bank of Nigeria, CBN, released the trapped funds owed many foreign investors.
“FPI, unlike Foreign Direct Investment, FDI, is not a static capital. It is the working capital that foreign investors employ to trade, which they move from market to market. They are usually hot monies that are always on the move.
“If a capital market is profitable, liquid and safe, and sovereign risk is controllable, their propensity to sudden flight will be curtailed.”
He stressed that domestic investors might not be able to carry the capital market alone.
“Local investors may not be able to shoulder the responsibility alone and their efforts require augmentation from foreign investors. For the wheel of transactions to keep rolling in the capital market, new funds injection is a necessity.”
Fiona Ahimie, President, Chartered Institute of Stockbrokers (CIS), said the widening outflow was a concern because foreign investors were yet to demonstrate sufficient confidence in holding Nigerian equities for the long term.
She said: “The widening outflow is a concern because it shows that foreign investors are still not fully comfortable holding Nigerian equities for the long term. It also means Nigeria is losing an important source of foreign currency and market liquidity.
“That said, I would not interpret it as a collapse of the Nigerian market. Domestic investors have stepped in strongly, and this has helped keep market activity robust. The bigger issue is market depth.
“Foreign investors tend to bring large pools of capital and often provide liquidity to major stocks, so their absence can make the market more dependent on domestic liquidity.”
On measures to retain international investors, Ahimie said: “The message for policymakers is clear: we need to make Nigeria attractive enough for foreign investors to stay, not just attractive enough for them to enter.
“I think the conversation has changed. FX is no longer the major constraint it used to be. The naira has been relatively stable, FX liquidity has improved and external reserves have now crossed $54 billion, giving investors much more confidence about the ability to enter and exit the market.
“There is also the concern around capital gains tax that is still hovering and giving foreign investors concern. This also needs to be closed out so there is clarity for planning.
“The bigger issue now is the quality and predictability of returns. Inflation remains important because an investor is not only looking at the return on the stock; they are looking at what that return is worth in real terms.
“Beyond inflation, Nigeria needs more policy consistency, deeper market liquidity, stronger corporate governance, predictable regulation and efficient market infrastructure.”
On the low foreign participation recorded in July, she said: “The 5.60 per cent foreign participation in July was the lowest level this year, and I think there were some temporary factors behind it. We saw profit-taking after the strong performance of the Nigerian equities market, while the appreciation of the naira also gave some foreign investors an opportunity to lock in returns.
“There was also the uncertainty around Nigeria’s move to T+1 settlement and FTSE Russell’s subsequent decision to place the country’s frontier-market reclassification under further review. That created an additional reason for some foreign investors to stay on the sidelines.”
Tajudeen Olayinka said foreign investors had not totally left the Nigerian capital market but had shifted more of their holdings towards fixed-income securities because of attractive yields.
He said: “What we must understand is that foreign investors haven’t totally left the Nigerian capital market. They have only concentrated their holdings in fixed-income securities because of the juicy state of the high-yield environment in that space, especially with respect to sovereign securities-Federal Government bonds and Treasury bills. “Foreign portfolio investors move around the globe to seek greater returns on a risk/return basis, usually considering short-term benefits. Once the environment is safe, they stay.
“The environment is considered safe where markets are allowed to allocate scarce resources efficiently. This is one of the reasons they continue to choose Nigerian markets ahead of other competing African markets.”
On the importance of foreign participation, Olayinka said: “Nigeria needs participation of foreign investors in her domestic capital market because of the liquidity they bring along to support the foreign exchange market.
“They are actually partly responsible for the current stability in the naira’s exchange rate. The most important thing is to have a good mix of domestic and foreign portfolio investors to reduce the usual unfriendly volatility associated with foreign portfolio dominance.” – Vanguard.
