Nigeria Capital Market Soars on Policy Reforms, But Sustainability Questions Remain
Nigeria’s capital market is experiencing one of its strongest rallies in history, driven by sweeping policy reforms. Market capitalization has surged by nearly 50% in just eight months, while foreign inflows have tripled year-on-year. The Nigerian Exchange (NGX) recorded over N4.19 trillion in turnover within six months, surpassing volumes last seen in the 2007–2008 boom era. The All-Share Index has also climbed to record highs, powered by foreign exchange unification, banking recapitalisation, and a newly signed insurance law that attracted investors to the financial services sector.
Experts say the surge reflects renewed investor confidence but warn that the momentum may not be sustainable without stronger growth in Nigeria’s real economy. While financial services are thriving, sectors like manufacturing, agriculture, and industry are lagging behind. Analysts caution that relying solely on market reforms without productivity gains could result in wealth concentration that does not translate into long-term economic stability.
According to Kasimu Garba Kurfi, CEO of APT Securities, the rally cannot be dismissed as mere speculation. He noted that the All-Share Index gained 42% year-to-date by mid-2025, far outpacing historical averages. Kurfi attributed the bullish trend to reforms such as the insurance law, which boosted listed insurers by 30–50% in weeks, and banking recapitalisation, which saw top lenders raise over N2 trillion from the primary market. Inflows from foreign investors also spiked, with portfolio investment rising to N1.14 trillion, representing 27% of total transactions.
However, risks remain. Some low-priced insurance and penny stocks have jumped by more than 400% this year without strong earnings to support such valuations. Analysts warn of potential corrections as speculative behaviour among new retail investors mirrors patterns seen before the 2008 crash. Liquidity concentration is also a concern, as just 20 companies now control 81% of the NGX’s market capitalization, making the index vulnerable to swings in heavyweight stocks such as BUA Cement, Airtel, and Nestlé.
Looking ahead, analysts project that the NGX could surpass N100 trillion in market capitalization by December 2025, if momentum holds. Yet, they stress that reforms alone cannot sustain the rally. Inflation, though easing to 22%, remains high, while energy costs and weak industrial productivity pose challenges. As Kurfi put it, “The capital market reflects the economy. If we do not strengthen production, the gains will remain limited to investors and will not translate into wider economic growth.”
Source: The sun