Sustaining Nigeria’s Capital Market Rally in 2026

Nigeria enters 2026 with its capital market at a historic inflection point, having transformed a rare bull run into a test of institutional strength and economic credibility. The central question is no longer how high the market can climb, but whether its gains can be sustained and converted into lasting growth for the broader economy, writes Festus Akanbi

Nigeria’s capital market entered 2026 on an extraordinary footing. On January 13, 2026, the Nigerian Exchange (NGX) All-Share Index (ASI) reached an all-time high of 165,837.33 points, extending a rally that had already delivered a 51.2 per cent return in 2025, the strongest performance in nearly two decades.

Market capitalisation expanded from N62.8 trillion to approximately N100 trillion within 12 months, placing Nigeria among the world’s best-performing equity markets. The central policy challenge now is not how the rally was achieved, but how to sustain and translate its gains into durable economic outcomes in 2026.

Structural Drivers of the Bull Market

The 2025–early 2026 rally was not driven solely by speculative exuberance. It was anchored in a combination of macroeconomic stabilisation, institutional reforms, regulatory coordination, and sector-specific catalysts. A critical inflection point was the monetary authorities’ shift away from aggressive tightening in early 2025. After years of interest rate hikes aimed at curbing inflation, a moderated stance improved risk appetite, lowered discount rates, and redirected portfolio flows toward equities, particularly dividend-paying and growth stocks.

Exchange-rate stability also played a decisive role. Following prolonged volatility, relative calm in the foreign exchange market reduced currency translation losses for corporates and restored confidence among foreign portfolio investors. This stability was reinforced by more substantial external buffers, rising reserves, improved remittance flows, and expanding domestic refining capacity. The result was a more predictable macroeconomic environment in which investors could price assets with greater confidence.

Equally important were reforms that improved market infrastructure and governance. The transition from a T+2 to a T+1 settlement cycle in December 2025 aligned Nigeria with global best practice, reduced counterparty risk, and enhanced liquidity. The passage of the Investment and Securities Act (ISA) 2025 strengthened investor protection, clarified regulatory oversight, and expanded the scope of permissible instruments. Together, these reforms improved market efficiency and credibility, making the rally more structurally grounded than previous boom cycles.

Breadth, Depth, and Sectoral Participation

One defining feature of the current market cycle has been its breadth. Performance was not confined to a narrow set of blue-chip stocks but spread across multiple sectors. Consumer goods stocks led with a 129.6 per cent return, supported by improved earnings, restored pricing power, and easing foreign exchange losses.

Insurance followed with 65.5 per cent, driven by the Nigerian Insurance Industry Reform Act, which mandated a 500 per cent increase in capital and triggered sector-wide repricing.

Industrial goods gained 58.9 per cent, reflecting construction demand and balance-sheet rerating, while banking stocks returned 39.8 per cent despite regulatory headwinds related to forbearance and dividend restrictions.

This sectoral diversification matters for sustainability. Markets driven by a single theme or sector tend to be fragile; those supported by broad earnings recovery and regulatory clarity are more resilient. The depth of participation was further reinforced by record foreign portfolio inflows, which rose to N.2 trillion in the eleven months to November 2025, accounting for over 20 per cent of total trading value, the highest since 2007. Rising domestic retail participation, facilitated by digital platforms such as NGX Invest, also broadened the investor base.

Capital Formation and the Real Economy

Beyond secondary-market performance, the sustainability of the rally depends on the extent to which capital markets support real economic activity. In 2025, the NGX facilitated approximately N6.49 trillion in capital raising across equity and fixed-income instruments. This included more than N2.5 trillion raised by banks ahead of the March 2026 recapitalisation deadline, thereby strengthening financial system resilience and lending capacity.

This function of capital markets, as engines of capital formation rather than mere trading venues, has direct implications for economic growth in 2026. Well-capitalised banks are better positioned to extend credit to households and firms, supporting consumption, investment, and job creation. Corporate equity and debt issuance reduce reliance on short-term bank financing and public borrowing, easing pressure on interest rates and crowding-out effects. In this sense, sustaining capital market gains contributes to macroeconomic stability and growth rather than simply wealth revaluation.

Risks to Sustainability

Despite strong fundamentals, the rally faces identifiable risks. The most disruptive episode in 2025 was the announcement of a 30 per cent capital gains tax on equities, up from 10 per cent. The resulting sell-off, which wiped 5 per cent off the market in a single session, underscored the sensitivity of capital markets to policy uncertainty. Although the government later signalled a review, the episode highlighted the importance of predictability and stakeholder consultation in fiscal reforms.

Global conditions also pose constraints. Geopolitical tensions and subdued oil prices, projected around $60–$65 per barrel, limit fiscal space and could increase domestic borrowing needs. Elevated sovereign yields may compete with equities for capital if monetary easing is delayed. Furthermore, after a 51 per cent rally, valuation-based effects imply that 2026 returns are likely to be more moderate and selective rather than broad-based.

Conditions for Sustaining Market Gains in 2026

Sustaining current gains requires reinforcing the structural pillars that underpinned the rally. First, policy coherence and predictability are essential. Fiscal reforms such as the Nigeria Tax Act 2025 must be implemented transparently, with clear timelines and stakeholder engagement, to avoid abrupt shocks to investor confidence. A simplified and equitable tax regime can enhance corporate profitability and deepen market participation over time.

Second, continued macroeconomic stability remains critical. Inflation moderation, projected to average about 12.9 per cent in 2026, and exchange-rate stability would improve real returns and support equity valuations. Gradual monetary easing, if aligned with disinflation, could further tilt portfolios toward equities, particularly in sectors with strong earnings visibility.

Third, deepening market supply is as important as sustaining demand. Potential landmark listings, most notably the planned listing of the Dangote Petroleum Refinery, could unlock trillions of naira in value, enhance liquidity, and rebalance sector weights. Selective privatisation or partial listings of state-owned enterprises would further broaden the market and anchor long-term institutional participation.

Fourth, regulatory collaboration must continue. The coordinated approach between the NGX, the Securities and Exchange Commission, and other stakeholders in 2025 proved instrumental in restoring trust. Sustained enforcement of governance standards, transparency, and investor protection will be decisive in attracting long-term capital rather than volatile flows.

Finally, technological and social investments should not be treated as peripheral. Market digitisation improves efficiency and access, particularly for retail investors, while initiatives linking capital markets to social outcomes enhance legitimacy and long-term stability. Markets ultimately thrive in societies characterized by rising incomes, greater inclusion, and confidence in institutions.

Implications for the Nigerian Economy in 2026

If sustained, the capital market rally has far-reaching implications for Nigeria’s economy in 2026. Rising market capitalisation relative to GDP signals deeper financial intermediation, improving the economy’s capacity to mobilise domestic savings for productive investment. Stronger equity markets reduce corporate dependence on debt, lower systemic risk, and support innovation and expansion.

Wealth effects from rising equity prices can also support consumption, particularly among middle-income households, while improved corporate balance sheets enhance employment prospects. At the macro level, a credible and liquid capital market strengthens Nigeria’s external position by attracting stable foreign investment and diversifying sources of inflows beyond oil.

Crucially, the current cycle differs from past rallies because it is driven by institutional reform rather than by commodity windfalls alone. This distinction increases the likelihood that gains, while perhaps more moderate, will be more durable.

Conclusion

Nigeria’s capital market entered 2026 in rare strength, underpinned by reforms, macroeconomic stabilisation, and broad-based participation. Sustaining these gains will depend less on replicating exceptional returns and more on preserving policy credibility, deepening market supply, strengthening institutions, and maintaining macro stability. If these conditions hold, the capital market will not only remain resilient in 2026 but also play a central role in financing growth, stabilising the economy, and repositioning Nigeria within global capital flows.