Nigeria stocks enter broader expansion phase

Nigeria’s equities market has moved into a stronger expansion cycle as abundant domestic liquidity, expectations of looser monetary conditions and a widening valuation rerating continue to draw investors into listed banks, industrial counters, consumer goods companies and exchange-traded funds.

Analysts at PAC Research have linked the rally on the Nigerian Exchange to four main forces: expanding local liquidity, expectations that monetary policy will normalise further, renewed appetite for stocks that had traded at discounts to earnings and assets, and a gradual improvement in confidence after a difficult reform period marked by currency adjustment, high interest rates and elevated inflation.

The NGX All-Share Index climbed to about 250,486 points on 11 May 2026, extending one of the strongest runs among frontier and African equity markets. The benchmark has risen sharply since the start of the year and has more than doubled from levels seen a year earlier, reflecting a combination of earnings momentum, sector rotation and increased positioning by pension funds, asset managers and high-net-worth investors seeking returns above inflation.

Market breadth has also improved. The rally is no longer limited to a few heavyweights, although large-cap banking and cement stocks remain central to the advance. Banking counters have benefited from expectations of strong first-quarter earnings, higher interest income, recapitalisation-driven balance-sheet strengthening and renewed investor confidence in tier-one institutions. Industrial stocks, led by cement producers, have attracted flows as investors price in infrastructure demand, stronger pricing power and improved margins where energy and foreign-exchange pressures have eased.

Consumer goods stocks have also gained attention after a period of pressure from weak household purchasing power and high input costs. Investors are betting that slower inflation, improved supply chains and currency stability will support margins, though analysts continue to warn that consumer demand remains uneven and price-sensitive.

Nigeria’s inflation backdrop remains important to the equity story. Headline inflation rose to 15.38 per cent in March 2026 from 15.06 per cent in February, ending an 11-month easing sequence. Food inflation also picked up, keeping pressure on households and complicating expectations for faster rate cuts. Even so, inflation is far below the levels recorded through much of 2024 and early 2025, giving investors room to consider equities as a hedge against currency and price-level risks.

The Central Bank of Nigeria cut its benchmark rate by 50 basis points to 26.5 per cent in February, its first policy move of 2026 and part of a cautious pivot after a long tightening cycle. The cash reserve ratio and liquidity ratio were retained, signalling that policymakers remain careful about inflation and exchange-rate stability. For the stock market, the rate cut strengthened expectations that yields may gradually decline, making equities more attractive relative to fixed-income instruments if earnings growth holds.

Domestic liquidity has been a decisive factor. System liquidity, pension allocations and reinvested corporate dividends have helped sustain demand, while foreign participation remains selective. Offshore investors are watching exchange-rate stability, capital repatriation conditions and policy consistency before making larger commitments. The naira’s relative stability has improved sentiment, but currency risk has not disappeared, especially with oil prices, import demand and dollar liquidity still shaping external accounts.

Valuation rerating is another pillar of the rally. Several leading stocks entered 2026 at low price-to-earnings and price-to-book multiples when compared with their earnings outlook and replacement value. As investors reassessed the impact of reforms, stronger corporate results and improved macro expectations, multiples expanded. That process has lifted market capitalisation and increased trading activity, but it has also raised questions about whether prices are moving ahead of fundamentals in some counters.

Nigeria’s broader economy gives the rally additional support. Real GDP growth reached 3.87 per cent in 2025, improving from 3.38 per cent in 2024, while the economy expanded by more than 4 per cent in the final quarter of 2025. Projections for 2026 point to stronger growth if oil output improves, non-oil activity remains resilient and reforms continue without major policy reversals. Corporate earnings in banking, telecommunications, cement, energy and selected consumer segments are expected to remain key tests of whether the market’s optimism is justified.