FPI Pullback from Nigerian Exchange Signals Tactical Caution
Foreign Portfolio Investment (FPI) activity on the Nigerian Exchange (NGX) moderated further in November 2025, declining by 13.1% month-on-month to N162.04 billion (US$112 million) from N186.62 billion (US$131.27 million) in October.
This marked the second consecutive monthly contraction, reinforcing a short-term risk-off posture among offshore investors amid global yield repricing, FX considerations, and profit-taking following the NGX’s strong run earlier in the year.
While the headline FPI decline appears negative, its impact on overall market performance has been notably cushioned by resilient domestic participation.
November trading patterns showed that reduced foreign inflows and selective outflows did not translate into broad market weakness. Instead, local institutional and retail investors increasingly absorbed supply, supporting price stability across large and mid-cap equities.
This domestic buffer has been instrumental in sustaining the upward trajectory of the NGX All-Share Index (ASI) and total market capitalisation.
The ASI’s growth continues to be underpinned by earnings-driven re-rating in banking, consumer goods, and selected industrial stocks, alongside improved market depth.
In effect, the market’s recent performance reflects a transition from FPI-led momentum to a more balanced structure where local capital plays a central role.
The November FPI pullback is better viewed as tactical repositioning rather than a loss of confidence in Nigerian assets. Foreign investors remain highly sensitive to:
● FX liquidity and repatriation clarity,
● Relative yields versus global fixed-income alternatives and
● Policy visibility ahead of fiscal and tax reforms.
Importantly, outbound flows have remained orderly, suggesting portfolio rotation rather than capital flight. This distinction matters: it implies that once policy and macro signals align more clearly, FPIs can return quickly, especially given Nigeria’s valuation appeal relative to frontier and select emerging markets.
Looking ahead to 2026, the evolving capital market narrative will be shaped by two intersecting forces: Nigeria’s New Tax Policy Regime: The impending tax framework covering both foreign direct investment (FDI) and local participation introduces a near-term assessment phase for investors.
In the short run, this may sustain cautious FPI behaviour as offshore funds recalibrate post-tax returns. However, if implementation is transparent, predictable, and market-friendly, the medium-term effect could be positive by improving fiscal credibility and reducing policy risk premiums.
Strengthening Domestic Investor Base: The growing dominance of local participation is a structural positive. Pension funds, asset managers, and retail investors are increasingly providing liquidity and stability, reducing the market’s historical over-reliance on volatile foreign flows.
This dynamic enhances capital formation, supports higher market capitalisation, and creates a more investable environment for long-term capital.
The NGX enters 2026 with a cautiously constructive outlook. While near-term FPI flows may remain uneven, the combination of improving corporate fundamentals, expanding local participation, and clearer policy direction positions the market for sustainable growth.
A re-acceleration of foreign inflows is likely once tax policy clarity, FX stability, and earnings visibility converge. In sum, November’s FPI decline reflects temporary investor caution rather than market fragility.
The NGX’s ability to advance despite softer foreign participation underscores a maturing market structure, one that strengthens the foundation for capital inflows, investment opportunity, and durable growth in the year ahead. Oil Glut: Analysts See Brent Dropping to $55 per Barrel in 2026
