Capital market defies economic headwinds as investors bet on corporate earnings, reforms

By Arthur Eriye

Nigeria’s capital market is once again demonstrating its resilience, as investors look past macroeconomic challenges to prepare for enhanced corporate earnings, reforms in the banking sector, and improving economic fundamentals.

In spite of high interest rates, inflationary pressures, and ongoing global uncertainties, the Nigerian Exchange (NGX) has maintained its status as one of Africa’s top-performing equity markets, supported by consistent demand for fundamentally strong stocks, especially in the banking, energy, and industrial sectors.

As trading approached the end of July, the NGX All-Share Index (ASI) was around 247,239 points, with total market capitalisation reaching approximately N159.5 trillion, highlighting the significant wealth generated on the Exchange over the past year. Market turnover has also remained strong, with investors trading over 612.9 million shares valued at about N32.6 billion in a single session, indicating sustained market liquidity despite occasional profit-taking.

READ ALSO; GTCO, Zenith, MTN, Seplat, Dangote Cement emerge as top picks for investors on NGX

The rally has been primarily driven by expectations of robust half-year corporate earnings, ongoing banking sector recapitalisation, renewed institutional involvement, and heightened confidence in Nigeria’s reform initiatives.

Market analysts indicate that investors are increasingly inclined towards companies with resilient earnings, solid dividend histories, and robust balance sheets, particularly at a time when inflation continues to diminish the real returns on fixed-income investments.

The banking sector has consistently been the most appealing segment of the market. Tier-1 lenders—such as Access Holdings, Zenith Bank, GTCO, First HoldCo, and UBA—continue to lead trading activities as investors prepare for anticipated stronger earnings reports and capital-raising initiatives driven by the Central Bank of Nigeria’s recapitalisation mandate.

The oil and gas sector has also gained from relatively stable crude oil prices, while major industrial players continue to draw long-term investors due to expectations of consistent earnings and attractive dividend yields.

Analysts suggest that the current market momentum indicates an increasing confidence that ongoing economic reforms—including the liberalisation of foreign exchange, fiscal adjustments, and initiatives to bolster investor confidence—could enhance corporate profitability in the medium term.

However, they warn that risks still exist. Persistent inflation, high borrowing costs, global geopolitical tensions, and exchange-rate fluctuations continue to challenge corporate earnings and investor sentiment.

Nonetheless, the capital market has shown remarkable resilience. From a market capitalisation of approximately N147.2 trillion at the end of June, the Exchange has gained over N12 trillion in value within a month, underscoring a renewed investor interest in Nigerian equities.

Investment professionals anticipate that the next phase of the market will be influenced by half-year earnings reports, interim dividend announcements, further advancements in bank recapitalisation, and the trajectory of monetary policy.

If corporate results align with expectations and macroeconomic reforms continue to progress, analysts believe that the Nigerian capital market could maintain its bullish trend into the second half of 2026, despite existing economic uncertainties.

For investors, the message is becoming increasingly evident: while macroeconomic risks remain, corporate fundamentals are once again at the forefront, reinforcing the capital market’s position as a vital destination for long-term wealth creation.