Net outflow widens by 1,073% as analysts warn of persistent foreign selling pressure
Foreign investors have withdrawn a net N266.07 billion from Nigeria’s equities market in the first seven months of 2026, marking a dramatic increase in foreign portfolio investment (FPI) outflows over the past three years.
Data from the Nigerian Exchange Limited (NGX), analysed by Vanguard, showed that FPI remained in net outflow territory between January and July from 2023 through 2026, with the gap between foreign inflows and outflows widening sharply this year.
In the first seven months of 2023, foreign investors brought N81.47 billion into the NGX, while N104.15 billion flowed out, resulting in a net outflow of N22.68 billion.
By July 2024, the net outflow had nearly tripled to N64.72 billion. Foreign inflows increased to N266.64 billion during the period, but outflows rose even faster to N331.36 billion.
Foreign participation increased significantly in 2025, with inflows reaching N609.73 billion and outflows rising to N671.56 billion. This left the market with a net outflow of N61.83 billion.
The situation deteriorated considerably in 2026. Between January and July, foreign investors brought N513.36 billion into the market but withdrew N779.43 billion, resulting in a net outflow of N266.07 billion.
Compared with the N22.68 billion net outflow recorded in the first seven months of 2023, the 2026 figure represents an increase of more than 1,073 per cent.
While foreign inflows increased by more than 530 per cent over the period, outflows rose by approximately 648 per cent, highlighting the growing difficulty of retaining international capital in the Nigerian equities market.
Analysts said the trend indicates that Nigeria’s challenge is no longer simply attracting foreign investors but also creating conditions that encourage them to maintain their investments in the country.
They attributed the widening outflow to factors including profit-taking, portfolio rebalancing and continued concerns about Nigeria’s macroeconomic and investment environment.
2026 Records Sharp Deterioration
The N266.07 billion net outflow recorded between January and July 2026 was more than four times the N61.83 billion recorded during the corresponding period of 2025 and approximately 11.7 times the N22.68 billion recorded in 2023.
The development came despite a substantial increase in trading activity on the NGX.
Total transactions reached approximately N11.98 trillion during the first seven months of 2026, almost twice the N6.01 trillion recorded during the same period in 2025.
However, much of the increased activity was driven by domestic investors, who have increasingly filled the gap created by reduced foreign participation.
Monthly figures showed that foreign outflows exceeded inflows in every month from January through July 2026.
January recorded N47.86 billion in foreign inflows against N66.28 billion in outflows, resulting in a deficit of N18.42 billion.
In February, inflows increased by 39.4 per cent month-on-month to N66.71 billion, while outflows rose by 9.1 per cent to N72.32 billion. The resulting deficit narrowed to N5.61 billion.
March recorded the largest movement during the period. Foreign inflows jumped 60.5 per cent to N107.05 billion, but outflows surged 151.3 per cent to N181.77 billion, producing the year’s largest 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. This resulted in a deficit of N61.10 billion.
May offered some relief as inflows declined marginally to N87.60 billion, while outflows plunged 38.8 per cent to N96.01 billion, reducing the deficit to N8.41 billion.
The improvement was short-lived. In June, outflows climbed 19.9 per cent to N115.08 billion, while inflows fell 18.1 per cent to N71.71 billion, widening the deficit to N43.37 billion.
July recorded the weakest foreign inflow of the year at N41.59 billion, representing a 42 per cent decline from June. Outflows also fell by 20.9 per cent to N91.03 billion, leaving a monthly deficit of N49.44 billion.
Adonri: Nigeria Still Needs Foreign Investors
David Adonri, Managing Director of Highcap Securities Limited, said Nigeria continued to require greater foreign participation in its capital market because of the broader economic benefits it generates.
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 substantial outflows could also be linked to foreign investors recycling funds through the market after making profits and receiving 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 support the market indefinitely without foreign participation.
“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.”
Foreign Outflows Raise Liquidity Concerns — CIS President
Fiona Ahimie, President of the Chartered Institute of Stockbrokers (CIS), said the increasing foreign outflows remained a concern because international investors had yet to demonstrate sufficient confidence in holding Nigerian equities over 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.”
How Nigeria Can Retain Foreign Investors
On measures needed to retain international investors, Ahimie said policymakers must focus on making Nigeria attractive enough for investors to remain in the market rather than simply encouraging them to enter.
“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.”
Commenting on July’s low level of foreign participation, Ahimie said several temporary factors may have contributed to the decline.
“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.”
Foreign Investors Shift Towards Fixed Income — Olayinka
Tajudeen Olayinka said the decline in foreign participation in equities should not be interpreted as a complete withdrawal from Nigeria’s capital market.
According to him, some international investors have shifted their portfolios towards fixed-income instruments because of the attractive yields available in the sector.
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.”
Olayinka also stressed the importance of foreign investors to Nigeria’s domestic capital market and foreign exchange environment.
He 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.”
The analysts’ views suggest that while Nigeria’s equities market continues to attract significant domestic capital, restoring sustainable foreign participation will depend on improved market depth, predictable policies, attractive real returns, stronger investor confidence and a stable regulatory environment.
