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Nigeria’s equities market has recorded one of its strongest runs in recent years, but the source of the money behind the rally is becoming as important as the size of the gains. The Nigerian Exchange (NGX) All-Share Index gained about 57 per cent in the first seven months of 2026, while market capitalisation increased by about N58.9 trillion to N158.2 trillion by the end of July.
Yet, some analysts suggest that the rally has not been accompanied by a corresponding return of foreign portfolio investors. Instead, domestic capital has emerged as the principal force supporting the market, raising questions about what is driving the liquidity, how sustainable the rally is and what could determine its next phase. They also note that the surge in the market value of some listed companies has not always been matched by commensurate improvements in their fundamentals, production capacity or tangible benefits to the wider economy and the average Nigerian.
Head, Coronation Research, Macro, Temilola Adeyemi, stressed that the answer lies partly in a fundamental shift in how Nigerian investors are approaching the market. She made this assertion at Coronation Asset Management’s H1 2026 Capital Market Review and Outlook organised in collaboration with the Capital Market Correspondents Association of Nigeria (CAMCAN) in Lagos.
Adeyemi who spoke on the changing composition of market participation said investors were increasingly moving away from concentrating their portfolios in equities alone and were becoming more deliberate about asset allocation across equities, fixed income and money-market instruments. The implication, she explained, is that investors are no longer simply asking how much their portfolios have gained from the equities market, but whether their wealth is growing in a manner that protects them against inflation and changing market conditions.
“Investors are thinking more than just being in the markets. They are thinking more of how do I spread my portfolio in such a way that it sustains me until the next cycle comes up,” Adeyemi said.
That change in behaviour is significant in a market where domestic investors accounted for 87.93 per cent of total equity transactions in the first half of 2026, according to NGX data, while foreign investors accounted for only 12.07 per cent. Domestic transactions amounted to about N8.44 trillion during the period, compared with N1.16 trillion for foreign investors. The domestic share of market activity was also considerably higher than the 72.92 per cent recorded in the corresponding period of 2025.
Where is this domestic money coming from?
“The money actually is coming from the institutional firms. For instance, PenCom recently increased its allocation to equities investment and because they dominate the institutional investment space, it has led to the massive surge we saw in H1,” Adeyemi said.
“Also when we examine or analyze some of these listed companies that have delivered over 100 per cent returns, we need to ask the question: how liquid are they? This is because what is actually driving the surge cannot be tied to their fundamentals alone.
“Moreso, the index where we record most of the growth is the industrial sector and the oil and gas sector. When we tie this to the nation’s GDP growth, we see that the oil and gas sector is the major contributor and because the anticipated listing of the Dangote Refinery, that space is picking up strongly,” she added.
The numbers point to a market increasingly supported by local money, particularly domestic institutional investors, rather than one being driven primarily by foreign portfolio inflows.
Adeyemi also drew attention to changing global investment patterns, noting that capital was increasingly moving from advanced economies into emerging markets as investors searched for stronger returns and opportunities. According to her, the trend was not peculiar to Nigeria, as other emerging markets, including Ghana, had also recorded strong equity market performances during the year.
“And it is not just Nigeria; even Ghana, at some point during this year, reached almost 80 per cent in terms of market growth,” she said.
“Money is moving globally from the advanced economies and coming into emerging economies. I also think one major thing that has been mentioned is the unification of the foreign exchange market, which actually saw the naira depreciating. When the naira depreciated, we saw a lot of Nigerians putting their money in global assets.
“But now that the naira has strengthened, I mentioned earlier that the naira has appreciated by 3.1 per cent. That is a level of confidence in the naira. If the naira is getting this kind of stability and there is no longer the same fear of further depreciation, why do I need to take my money out of the country?”
Adeyemi also expects foreign participation to improve over time as the domestic market demonstrates stronger performance and companies continue to record growth. She argued that the strong performance of domestic companies could eventually create conditions for greater foreign participation, particularly if investors begin to see Nigeria as a market with stronger corporate growth prospects.
That outlook is consistent with the wider market debate over whether Nigeria’s current rally is the beginning of a more sustainable cycle or another period of rapid repricing. Analysts note that the more important question is whether domestic investors have developed sufficient capacity to sustain the market while the conditions required for foreign participation improve.
Recent NGX data provides some evidence of that capacity. Total equity turnover reached about N9.60 trillion in the first half of 2026, more than double the N4.19 trillion recorded in the corresponding period of 2025. Domestic transactions accounted for most of that increase.
Domestic transactions rose to N8.44 trillion in H1 from about N3.06 trillion in the corresponding period of 2025, while foreign transactions stood at N1.16 trillion. This means that the market has not simply become quieter because foreign investors reduced their participation. Instead, overall activity expanded substantially, with local investors taking up much of the space created by the relatively weaker foreign presence.
Managing Director of Coronation Asset Management, Aigbovbioise Aig-Imoukhuede, said the shift represented a significant change in the structure of the market, with domestic investors becoming the dominant force behind the 2026 performance.
He said the market’s 57 per cent return in the first seven months reflected stronger domestic participation, improving macroeconomic conditions and rising investor confidence, rather than a significant resurgence of foreign portfolio investment.
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As of the end of July, the NGX All-Share Index had gained 57 per cent, placing Nigeria among the world’s strongest-performing equity markets in dollar terms, according to Bloomberg data.
Aig-Imoukhuede, however, cautioned that the scale of the gains required investors to consider whether the performance represented a sustainable structural recovery or a temporary market re-rating. While foreign investors accounted for only 12.1 per cent of total NGX transaction value by June, down from 27 per cent a year earlier, he said the figures did not indicate that international investors had completely withdrawn from Nigeria.
He noted that the value of foreign investors’ portfolios increased modestly from N1.13 trillion to N1.16 trillion during the first half of the year, suggesting that the major change was the much faster expansion of domestic activity. “What changed was the scale of domestic participation, which expanded at a far more significant pace of 129.1 per cent,” he said.
Foreign portfolio investors were also net sellers of Nigerian equities during the first six months of the year despite the wider market rally. Aig-Imoukhuede attributed part of that positioning to the attractiveness of short-dated Nigerian government securities, which offered yields close to 20 per cent.
“From a pure risk-adjusted perspective, that allocation decision was understandable,” he said.
The implication is that foreign investors have not necessarily lost interest in Nigerian assets altogether, but are weighing equities against other instruments offering relatively high returns with shorter duration and different risk characteristics.
He rejected concerns that the increasing dominance of domestic investors represented a weakness for the market, arguing that a market supported by domestic savings could become more resilient over time. “If anything, this is a sign of market maturity. Markets become more resilient when they are supported by savings rather than speculation,” he said.
The stronger domestic participation, however, has not eliminated concerns about market breadth and valuations. Aig-Imoukhuede said the rally had been relatively narrow and that broader participation and stronger fundamentals would be required to sustain the gains.
This reinforces Adeyemi’s warning that the performance of some stocks that have delivered returns of more than 100 per cent should be assessed alongside their liquidity and fundamentals.
For investors, the distinction between price appreciation and underlying corporate performance could become increasingly important as the market moves beyond the exceptional gains recorded during the first half of the year.
Aig-Imoukhuede said the market was unlikely to continue rewarding indiscriminate investment after the significant re-rating recorded in several large-cap stocks. He therefore urged institutional investors to focus on companies with strong earnings momentum, sound corporate governance, adequate liquidity and clear prospects of benefiting from renewed international participation.
What could bring foreign investors back?
Aig-Imoukhuede said the key question for the second half of 2026 was whether Nigeria could attract a new wave of international capital. He identified developments around market classification, foreign-exchange liquidity, reserves and corporate earnings as factors that could influence the return of foreign investors.
According to him, international index providers are increasingly paying attention to Nigeria’s market.
He noted that FTSE Russell was reviewing Nigeria’s position within its Frontier Market Index framework, while S&P Dow Jones Indices had placed Nigeria on a watchlist for possible reclassification from standalone to frontier-market status.
Although neither outcome was guaranteed, he said any change in Nigeria’s classification could have implications for international capital flows, particularly passive investment.
“Global capital follows confidence, but domestic capital trades on it,” he said.
Foreign investors would also be watching developments in the foreign-exchange market, particularly the sustainability of exchange-rate stability.
Aig-Imoukhuede said improved FX liquidity, a stronger naira and reserve accumulation supported by more sustainable sources of foreign-exchange inflows were important indicators of Nigeria’s external resilience.
He said the sustainability of exchange-rate stability would remain a major consideration for foreign investors because currency risk directly affects the value of Nigerian assets when measured in foreign currency.
