The Nigerian stock market is set to face a crucial test in 2026 as investors weigh global risks against domestic reforms, recapitalisation-driven activity and the prospect of major new listings, following a historic rally in 2025.

According to Professor Uche Uwaleke, President of the Capital Market Academics of Nigeria, the outlook for 2026 is one of cautious optimism. While the market enters the new year from a position of strength, expectations are more measured after the extraordinary gains of 2025. Structural reforms, easing inflation, exchange-rate stability and fresh capital injections from recapitalisation programmes are expected to support equities, even as external headwinds and valuation effects moderate returns.

On the global front, uncertainty remains elevated. Lingering geopolitical tensions, particularly the Russia–Ukraine conflict, are expected to keep crude oil prices subdued at about $60–$65 per barrel, below Nigeria’s fiscal comfort level. With the 2026 federal budget benchmarked at $64.85 per barrel, prolonged oil price weakness could constrain fiscal space, widen deficits and keep government borrowing elevated. This may exert upward pressure on yields and pose a potential headwind for equities if not carefully managed.

Domestically, however, economic indicators suggest resilience. The Central Bank of Nigeria projects GDP growth to accelerate to 4.49 percent in 2026, supported by ongoing structural reforms. Inflation is forecast to moderate to an average of 12.94 percent, while the exchange rate is expected to remain broadly stable, underpinned by rising external reserves, steady remittances and improved investor confidence. A gradual easing of monetary policy could also encourage portfolio rebalancing from fixed income into equities, particularly dividend-paying and growth stocks.

This cautious optimism follows an exceptional performance in 2025, when the Nigerian Exchange (NGX) recorded its strongest rally in nearly two decades. The All-Share Index rose by 51.19 percent, pushing total market capitalisation close to the N100 trillion mark and placing Nigeria among the best-performing equity markets globally.

The rally was broad-based. The consumer goods sector led the market with a 129.6 percent return, driven by improved earnings, easing foreign exchange losses and renewed confidence in pricing power. The insurance sector gained 65.6 percent following the passage of the Nigerian Insurance Industry Reform Act 2025 and expectations of recapitalisation, while industrial goods stocks advanced 58.9 per cent on strong construction demand and significant stock re-ratings.

Banking stocks also posted a solid 39.8 percent return, despite regulatory headwinds and dividend suspensions linked to the CBN’s forbearance directive. Investors focused instead on the long-term benefits of the banking sector recapitalisation, which raised over N2.5 trillion from 16 banks ahead of the March 2026 deadline. Oil and gas stocks were the only laggards, closing the year slightly negative amid mixed crude price dynamics.

Looking ahead, recapitalisation programmes across banking, insurance and capital market operators are expected to remain dominant market themes in 2026, alongside rights issues, mergers and acquisitions. Potential landmark listings, particularly the planned listing of the Dangote Petroleum Refinery, could act as major catalysts, deepening market liquidity and attracting fresh foreign capital.

Professor Uwaleke noted that after a 51 percent rally, valuation effects are likely to temper headline returns in 2026, with performance becoming increasingly stock-specific. He advised investors to focus on earnings quality, balance-sheet strength and sector positioning.

“In a volatile, uncertain and complex environment, investors who adopt a long-term perspective, diversify their portfolios and align with Nigeria’s ongoing market transformation are more likely to preserve capital and generate sustainable returns in 2026 and beyond,” he said. (Nigerian Tribune)