Local investors have taken firm control of the NGX as foreign portfolio inflows dwindle to their lowest point this year, with settlement-related uncertainty around T+1 and attractive fixed-income returns tugging the market in different directions.
Nigeria’s equities market delivered a study in contrasts in May, posting its busiest trading month of 2026 even as the foreign investors who once helped anchor the market continued to head for the exits.
Figures contained in the latest Domestic & Foreign Portfolio Investment Report, published by NGX Regulation Limited, show that foreign investors accounted for a mere 9.45 percent of total transactions on the Nigerian Exchange in May, down sharply from 13.01 percent in April and the lowest share recorded so far this year. In naira terms, foreign transactions fell by nearly 26 per cent month-on-month, sliding to N183.61 billion from N247.77 billion.
The retreat is all the more striking given the backdrop against which it occurred. Total market transactions climbed by 7.79 percent to N1.94 trillion in May, up from N1.80 trillion in April, marking the strongest monthly turnover the Exchange has recorded this year.
The inference is difficult to escape: as foreign money thinned out, domestic investors, both institutional and retail, stepped up to fill the gap and then some.
The scale of domestic dominance becomes clearer when set against last year’s numbers. Total transactions in May 2026 were up 177.42 per cent from the N700.50 billion recorded in the same month of 2025. Zoom out further, and the picture is even starker: cumulative transactions between January and May 2026 hit N7.90 trillion, more than double the N3.41 trillion churned out over the same period last year.
Analysts attribute this surge almost entirely to local participants, with the report noting that institutional and retail investors have continued to dominate trading even as foreign appetite cools.
The selling bias among foreign investors was not confined to May. Foreign investors were net sellers for the month, offloading N96.01 billion against inflows of just N87.60 billion, a net outflow of N8.41 billion.
Extended over the first five months of the year, the pattern looks even more entrenched: inflows of N400.06 billion against outflows of N573.32 billion, leaving a cumulative net foreign outflow of N173.26 billion between January and May.
Part of the explanation lies in a structural shift that has unsettled foreign portfolio managers. Nigeria moved to a T+1 settlement cycle on June 1, 2026, shortening the window in which trades must be settled. While the change is designed to modernize the market and align it with global best practices, it has not been universally welcomed by international investors accustomed to longer settlement windows and the operational buffers they allow.
Notably, FTSE Russell cited the transition as a factor in its decision to pause Nigeria’s anticipated return to Frontier Market status, a reclassification that many had hoped would reopen the taps of foreign passive and index-tracking capital.
Market watchers say that until the operational kinks around T+1 are ironed out, some foreign portfolio investors are likely to remain on the sidelines, watching rather than wading back in.
Domestic institutional investors, for their part, appear to have been drawn away from equities by more attractive returns elsewhere. With Treasury bill yields climbing above 17 percent and open market operation rates approaching 22 percent during May, institutional players booked net equity sales of N93.01 billion, a clear sign of portfolio rebalancing toward fixed income as the risk-reward calculus shifted.
Retail investors told a different story. Individual investors remained net buyers in May, posting a net purchase position of N40.41 billion despite the broader market correction.
Capital market analysts point to the growing reach of digital trading platforms and rising financial literacy among younger Nigerians as key drivers of this resilience, trends that continue to widen and deepen domestic participation in the equities market, even as foreign investors keep their distance.
Taken together, the numbers paint a market in transition: one increasingly powered by local capital and retail enthusiasm, even as it works through the growing pains of settlement reform and competes for institutional attention against a fixed-income market currently offering double-digit returns.
Whether foreign investors return in force will likely hinge on how quickly operational concerns around T+1 settlement are resolved and on whether FTSE Russell’s frontier market review eventually swings back in Nigeria’s favor.
WHAT YOU SHOULD KNOW
Nigeria’s equities market is undergoing a quiet but decisive shift: domestic investors, institutional and retail alike, are now the ones driving record trading volumes, while foreign investors keep pulling money out, dragged by uncertainty over the new T+1 settlement cycle and lured elsewhere by high fixed-income yields.
Nigeria’s stock market is growing, but that growth is increasingly homegrown, not foreign-fueled, and that shift will likely persist until settlement concerns are resolved and Nigeria’s frontier market status is restored.
