Key Market Developments

Foreign Investment Flows

- Foreign inflow hit a 2024 low of ₦11.26 billion in September

- Foreign outflow increased to ₦30.15 billion (from ₦24.38 billion in August)

- YTD foreign inflow: ₦310.99 billion (substantially higher than ₦108.93 billion in 2023)

- Peak inflow was ₦54.87 billion in May 2024, followed by steady decline

Market Activity

- Total transactions increased 29.90% month-over-month to ₦493.01 billion

- Year-over-year increase of 66.67% compared to September 2023

- Domestic investors dominated with 84% of transactions

- Retail investors outperformed institutional investors by 28%

Economic Implications

Immediate Concerns

1. Capital Flight Risk

   - Net negative foreign investment flow (outflow exceeding inflow)

   - Suggests declining foreign investor confidence

   - Potential pressure on foreign exchange reserves

2. Currency Pressure

   - Naira trading at ₦1652.25/$ indicates continued weakness

   - Foreign investment decline may further pressure exchange rates

   - Risk of creating a negative feedback loop with foreign investment

3. Monetary Policy Challenges

   - High benchmark rate (27.25%) failing to attract foreign capital

   - Inflation at 33.88% suggesting potential further rate hikes

   - Balancing act between controlling inflation and attracting investment

Positive Indicators

1. Domestic Market Resilience

   - Strong growth in total market transactions

   - Robust domestic investor participation

   - Particularly strong retail investor engagement

2. Year-on-Year Improvement

   - Higher YTD foreign inflow compared to 2023

   - Significant increase in total transaction value

   - Suggests underlying market strength despite challenges

Strategic Considerations

Short-term Outlook

- Likely continued pressure on the Naira

- Potential for further monetary tightening

- Risk of continued foreign investment decline

Long-term Implications

- Need for structural reforms to attract stable foreign investment

- Opportunity to develop domestic investor base further

- Importance of addressing currency stability for long-term growth

Recommendations

1. Policy Measures

   - Consider additional measures beyond interest rates to attract foreign investment

   - Focus on structural reforms to improve market confidence

   - Develop strategies to maintain domestic investor momentum

2. Market Development

   - Further strengthen domestic investor participation

   - Enhance market infrastructure and transparency

   - Consider incentives for long-term institutional investment

3. Risk Management

   - Monitor foreign exchange exposure

   - Develop contingency plans for continued foreign outflows

   - Strengthen domestic market resilience