From 2015 to 2016, Foreign Portfolio Investors (FPIs)attraction to Nigerian financial markets was constrained by FX scarcity. The NBS estimated total FPIs inflows at $6.0bn in 2015 to $1.8bn in 2016, down from $14.9bn from 2014. However, FY17 data showed a 301.6% rebound to $7.3bn.
FPIs’ appetite for Nigerian equities consistently out crowded demand for bonds in 2017. In Q1-17, when FX was relatively scarce in the country, a total of $101.9mn trickled into Nigerian equities in form of FPIs (vs null for Bonds). With the advent of the CBN’s I&E Window in Q2-17, FPIs inflow into equities soared to $3.6bn while bonds received $482.4mn. Although FPIs interest in money market instruments maintained a decent uptrend from Q1-17 to Q3-17 (averaging $343.2mn), FPIs flows to money market securities surged more than 6.0x in Q4-17 to $2.2bn and $3.2bn in FY-17 (vs. $557.9mn in FY-16).
Renewed FPIs appetite for Nigerian assets is driven by attractive yields environment, cheap market valuation and most importantly, stable FX regime. In addition, the upsurge in the money market inflows may be traceable to market expectation of a near-term rate cut in Q4-17. We particularly commend the CBN’s forex policies and hold a stable outlook for forex and reserves amid stable crude prices.