The Nigerian stock market has been caught in a wave of heavy sell-offs this November, with banking stocks at the center of the storm. The All-Share Index (ASI) fell to 144,646 points on November 19, marking a daily decline of 0.25% and a sharp monthly drop of 3.55%. Despite a still-positive 40.53% year-to-date return, investor sentiment has weakened as market capitalization tumbled from above N99 trillion to roughly N92 trillion—wiping out more than N7 trillion in value.
Banking stocks have taken some of the biggest hits. The banking index slipped 1.22% at mid-week, continuing its worst run since March 2010 after a 7.27% weekly fall earlier in the month. Analysts say the downturn is the result of a mix of pressure points, from regulatory uncertainty to macroeconomic headwinds. Banks are also grappling with slower asset growth projections—capped near 20% annually—amid high inflation and a stricter reserve requirement of 50%.
A combination of policy reforms and geopolitical tensions has worsened the sell-off. Proposed changes to Nigeria’s Capital Gains Tax (CGT), which could triple tax rates, triggered panic among both domestic and foreign investors. Although Finance Minister Wale Edun later signaled potential exemptions for foreign reinvestments, confidence remains shaky. Further rattling the market were comments from U.S. President Donald Trump threatening military action and imposing steep tariffs on emerging economies, accelerating capital outflows and putting pressure on medium- and large-cap banks.
Despite the volatility, the underlying fundamentals of Nigeria’s top banks remain strong. Tier-1 banks continue to dominate trading volumes on the NGX, buoyed by a robust recapitalization drive, improved liquidity from a N4 trillion market infusion, and rising asset values projected into 2025. The sector’s market capitalization climbed from N3.2 trillion in 2020 to N10.5 trillion by mid-2025, strengthened by digitization, strong interest income, and resilient balance sheets. Many investors still see value opportunities, with dividend yields sitting at 7–12% and forward price-to-earnings ratios in the 10–15x range.
Looking ahead, analysts expect continued volatility through the end of the quarter, though clearer policies or stronger earnings updates could help stabilize the market. Investment experts advise focusing on fundamentally solid banks such as UBA, Stanbic IBTC, Zenith, and GTCO, which are better positioned to weather market shocks. While the correction may create attractive entry points, they warn that global uncertainties mean caution remains essential—particularly for investors eyeing smaller banks with thinner profit margins.
source: nairametrics