Even though Nigeria's stock market delivered an estimated 67% return in U.S. dollar terms by July 10, 2026, making it the best performer among 92 stock exchanges worldwide, foreign investors have significantly reduced their participation. In May 2026, foreign transactions slumped by 25.9% to N183.61 billion, representing only 9.45% of total market activity, a persistent decline from 13.74% in April and 16.56% in March. This marks the worst decline in foreign participation in 2026 and a sharp fall from 29.17% in the same period of 2025.
Analysts attribute this decline primarily to the implementation of the new T+1 settlement system, which took effect on June 1, 2026. This system reduces the time for transaction settlement to one business day, raising concerns among foreign investors about operational changes, the timing of cash settlements, and system readiness. Samuel Sule, CEO of Renaissance Capital Africa, and Kehinde Jones, Head of Research and Strategy Lead at Anchoria Securities Limited, both highlighted that the accelerated settlement cycle and the need for foreign investors to potentially hold naira in advance to mitigate currency risk have made them more cautious.
Foreign investors were net sellers in May, with outflows of N96.01 billion exceeding inflows of N87.60 billion, resulting in a net foreign outflow of N8.41 billion. This indicates that international portfolio investors are actively reducing their exposure to Nigerian equities. Concurrent with these concerns, global index provider FTSE Russell has placed Nigeria's planned move to Frontier Market status under review, citing issues with the T+1 settlement cycle and potential pre-funding requirements for foreign investors. This decision could deter index-linked funds from buying Nigerian stocks until these operational concerns are resolved.
In contrast to the declining foreign participation, total transactions on the Nigerian Exchange Group (NGX) rose by 7.79% to N1.94 trillion in May 2026 from N1.80 trillion in April, representing the highest monthly trading value so far in the year. Domestic investors dominated this activity, accounting for N1.76 trillion, or 90.55% of total transactions. This strong domestic activity, alongside economic reforms, improved foreign exchange liquidity, banking sector recapitalization, stronger corporate earnings, and a relatively stable naira, contributed to the market's high returns, despite the foreign investor pullback.
While Bloomberg evaluates actual investment performance and returns, FTSE Russell focuses on market accessibility, settlement efficiency, and the ease with which international investors can deploy and repatriate capital. This divergence in assessment highlights that while Nigerian equities are performing exceptionally well in terms of returns, the market infrastructure's evolution is still a point of concern for international benchmark providers and, consequently, foreign investors.
