According to the March Domestic & Foreign Portfolio Investment report of the Nigerian Exchange Limited (NGX), the total transaction value in the domestic equities market increased by 0.9% m/m to NGN185.26 billion in March (February: NGN183.56 billion).
The increase was mainly due to a 3.6% m/m increase in domestic transactions to NGN143.09 billion (77.2% of total transaction value). Meanwhile, foreign transactions declined by 7.2% m/m from NGN45.43 billion in February to NGN42.17 billion in March.
Experts at Cordros Capital say the continued low participation from the foreign investors reflects the impact of FX liquidity constraints and lack of flexibility in the FX framework.
In the short to medium term, it is also expected that domestic investors will continue to dominate market performance, however, buying activities will be constrained by expectations about uptick in FI yields amid uncertainties associated with an election cycle. Also, FPIs who have exhibited a lacklustre interest in domestic equities are likely to remain on the sidelines due to sustained FX liquidity challenges and interest rate hikes by central banks in advanced countries.
The amount disbursed by the Federation Accounts Allocation Committee (FAAC) to the three tiers of government in April (based on March 2022 revenue) increased by 22.9% m/m or NGN135.02 billion to NGN725.57 billion (March 2022: NGN590.55 billion).
According to Analysts at Cordros Capita; the increased pay-out was due to a significant month-on-month revenue increase across Petroleum Profit Tax (PPT), Value Added Tax (VAT), Companies’ Income Tax, and Oil & Gas royalties. Overall, the FGN received 38.2% or NGN277.10 billion (March 2022: NGN236.18 billion), and State Governments received NGN227.29 billion (March 2022: NGN190.01 billion), while the Local Governments received NGN167.91 billion (March 2022: NGN140.61 billion).
They emphasize that actual oil revenue will remain below the FGN’s budget as low crude oil production continues to limit the gains from the rally in oil prices. However, we expect the non-oil revenue to support the aggregate revenue given our expectations of sustained positive readings in GDP. Accordingly, it is expected that the amount to be shared by the tiers of government to remain stable at current levels (NGN650.00 billion to NGN750.00 billion) over the medium term.
