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The 2024-2026 banking recapitalisation exercise may have strengthened Nigeria’s banking industry, but it also redirected scarce investment capital away from productive sectors of the economy, the Chief Executive Officer of HighCap Securities Limited, David Adonri, has said.
He argued that government policies have prioritised capital formation in banks while sectors that generate production, employment and economic growth continue to struggle for long-term funding. According to him, manufacturing, agriculture, mining and power, were left struggling for investment, thereby limiting the economy’s capacity.
Adonri made this assertion during the Capital Market Correspondents Association of Nigeria (CAMCAN) Mid-Year 2026 Capital Market Review and Outlook in Lagos. “The little cash that we had was now being forced to migrate to the banking sector. The banks already had surplus funds, so more cash was migrated from the productive sector to the surplus sector,” Adonri said.
He added, “Why don’t you organise an orderly system that will enable capital flow from the capital market straight to the productive sector? That is what the capital market is all about.” According to him, government policies have largely concentrated on recapitalising service-oriented industries such as banks, insurance companies and capital market operators, while neglecting industries that directly create wealth through production.
“The Federal Government has come up with policies to recapitalise the banks, recapitalise the insurance sector and recapitalise the capital market because these are all service sectors. What is the Federal Government doing in terms of recapitalising the productive sectors such as power, manufacturing, agriculture and energy?” he asked.
His comments come barely three months after the conclusion of the Central Bank of Nigeria’s banking recapitalisation programme, under which Nigerian banks collectively raised about N4.65 trillion to meet new minimum capital requirements. According to the Securities and Exchange Commission (SEC), the exercise attracted significant domestic and foreign participation and was designed to strengthen the banking system and support Nigeria’s long-term economic growth ambitions.
Adonri, however, maintained that stronger banks alone would not automatically translate into economic prosperity unless capital was deliberately channelled towards productive enterprises capable of expanding output and employment.
According to him, there is no deliberate national policy directing long-term investment towards strategic productive industries.
“The productive sector is where wealth is created. The capital market should deliberately channel capital to sectors that generate production and employment.”
Election risks threaten market recovery
Beyond the recapitalisation debate, Adonri warned that Nigeria’s stock market could face increased volatility as political activities ahead of the 2027 general elections gather momentum. He said politicians, institutional investors and several market operators were already increasing cash positions in anticipation of election-related spending and uncertainties.
“So one of the things market analysts are pointing to as one of the reasons affecting the equities market is that politicians are exiting the market and going into cash to have enough money to run their campaigns.”
He explained that election spending could inject additional liquidity into the economy, worsen inflationary pressures and reduce investors’ appetite for equities. Despite those risks, he dismissed suggestions that the recent correction in the Nigerian Exchange was evidence of structural weakness.
“The current correction is institutional repositioning and not structural breakdown. What we are seeing is realignment and repositioning,” he said.
According to him, unlike previous market crashes that were triggered by weak regulation and systemic failures, the present decline largely reflects portfolio adjustments by institutional investors after an extended rally.
Market correction reflects fundamentals
Adonri noted that the equities market enjoyed an exceptional rally during the first five months of 2026 before entering a correction in June. He attributed the earlier rally partly to improving macroeconomic conditions, stronger corporate earnings expectations and investor sentiment, but said share prices had moved ahead of company fundamentals in several cases.
Following the release of audited financial statements and dividend payments, investors are now reassessing company valuations. “Investors are now interested in the realignment between the fundamentals that have become visible and the prices of securities.”
He projected only a mild recovery in the second half of the year, saying future gains would be driven more by corporate earnings than speculative buying.
High interest rates to remain
Adonri also forecast that interest rates would remain elevated for the rest of the year as monetary authorities continue efforts to contain inflation.
According to him, rising inflation could compel the Central Bank of Nigeria (CBN) to maintain a tight monetary policy stance, making fixed-income instruments attractive to investors. “Those investing in bonds will still enjoy high yields. Equities will experience only a mild recovery.”
He advised investors against concentrating portfolios solely on equities stressing that diversification helps investors withstand market volatility.
Dangote Refinery listing could reshape market
Among the biggest developments expected in the second half of 2026, Adonri identified the anticipated listing of Dangote Refinery on the Nigerian Exchange as a potential game changer. He said investors had already begun repositioning portfolios to create liquidity ahead of the expected public offering.
He added that the listing could deepen market capitalisation, broaden retail participation and further strengthen the domestic capital market. “Already, investors are exiting their position in other stock in anticipation of Dangote Refinery’s IPO.”
Economic outlook remains positive
Despite concerns over inflation and political risks, Adonri said Nigeria’s macroeconomic outlook remained relatively favourable. He pointed to improving foreign exchange reserves, rising crude oil production, increasing domestic refining capacity and a more stable exchange rate as positive developments supporting the economy.
He noted that Nigeria’s external reserves rose from about $45 billion at the end of 2025 to over $51 billion by late June 2026, while crude oil production averaged around 1.7 million barrels per day, providing stronger fiscal support for government finances.
He also referenced improved sovereign credit assessments by major international rating agencies, saying these reflected growing confidence in Nigeria’s macroeconomic reforms.
Indeed, the International Monetary Fund recently acknowledged improvements in Nigeria’s macroeconomic environment following ongoing fiscal and monetary reforms, while international rating agencies including S&P Global Ratings, Fitch Ratings and Moody’s have upgraded or affirmed Nigeria’s sovereign ratings, citing stronger foreign exchange management, improving external reserves and better fiscal conditions.
Poverty remains major concern
Adonri argued that positive macroeconomic indicators have yet to translate into improved living standards for many Nigerians. He expressed concern over the country’s persistently high poverty level and weak domestic savings, saying these continue to constrain long-term capital formation.
“With the rate of poverty. People barely have enough money to meet their basic needs, this means that they cannot comfortably invest in the capital market.” He said sustainable economic development would require policies that stimulate domestic production rather than excessive reliance on monetary tightening.
“The government has been running demand-management policies. What Nigeria needs now are supply-side policies that will revive production.” He listed agriculture, mining, electric power, metallurgy and manufacturing as sectors requiring urgent policy attention and increased investment.
Call for production-led growth
Adonri concluded that Nigeria’s economic future depends less on financial sector expansion than on building productive capacity.
He maintained that stronger banks, stable exchange rates and improved macroeconomic indicators would have limited impact if industries responsible for creating goods, jobs and exports remained underfunded.
“The capital market exists in an environment shaped by socioeconomic factors,” he said. “As political and socioeconomic conditions change, they impact the macroeconomy, which in turn either benefits or stifles the capital market.”
He added that while reforms helped propel the market rally witnessed earlier in the year, investors had now become more cautious. “The reform-propelled market rally became fearful. What we are witnessing today is institutional repositioning rather than structural breakdown.”
