Foreigners were net sellers of Nigerian stocks for most of 2014 and 2015. Nonetheless, the narrative started to change in mid-2016, following the official devaluation of the naira. By Apr-17, foreigners started plying into the market at record levels on the backdrop of the introduction of the market friendly investors and Exporters FX window (I & E window) that brought along improved FX liquidity and restored investor confidence in the Nigerian market.
Looking at the recent trend of foreign flows, it appears that foreign enthusiasm for Nigerian stocks has waned. Since Dec-17, a downtrend has been in place but what is more interesting is the fact that foreigners started to net-sell Nigerian stocks by Apr18 (1-year after the introduction of the I&E window). Reasons are not farfetched; the market is responding to concerns over upcoming elections as well as the general risk-off sentiment for Emerging and Frontier Market assets. For us, we think upcoming elections could be the next “big” catalyst that would spur buying opportunities.
Political uncertainty has been one of the key reasons that the market has remained underwhelming as the macro-economy seems to be recovering, albeit gradually, thanks to improved crude oil output and oil prices which has so far surprised positively in 2018. Thus, with the outlook for the economy still relatively stable, we anticipate a post-election equities market recovery on the assumption that political uncertainty would have cleared-off, hence, we expect the market to respond accordingly.