Foreigners miss out on world’s best performing stock market

…As funds flow to short term debts

…Market Cap rises by N60trn in 7 months

While Nigeria’s local investors reaped the extraordinary rewards of a world-beating market surge, international capital chose a remarkably different path.

As Nigerian equities staged a staggering 60 percent rally year-to-date (YtD), foreign portfolio investors largely watched from the sidelines, opting instead to park their capital in short-term debt instruments with yields hovering around 20 percent.

Nigeria’s equities trading data showed that foreign participation dropped significantly, falling to about 12 percent of transactions in the first half (H1) of year 2026 compared to 27 percent the previous year.

The retail and institutional Nigerian investors accounted for N8.448trillion or 87.93 percent of total market activity as against N1.160trillion or 12.07 percent by their foreign counterparts.

Rather than contributing in fueling the stock market rally, foreign capital largely bypassed equities to lock into high, risk-free yields on short-term government debt such as Treasury bills (T-Bills) offering around 20 percent.

“We see the current environment as one of evolving investor preferences rather than diminished interest in Nigeria’s equity market. What is particularly encouraging is that the market has demonstrated remarkable resilience, underpinned by a deepening domestic investor base,” said David Adonri, vice president, Highcap Securities Limited.

“As macroeconomic stability strengthens and reforms continue to take effect, we expect Nigeria’s investment proposition to become even more compelling for long-term capital,” said Adonri, noting that the Nigerian Exchange remains focused on building a more efficient, transparent and globally competitive market by leveraging technology, advancing sustainability, strengthening market infrastructure, fostering innovation, and expanding access to quality investment opportunities.

In a remarkable display of market resilience and growing investor confidence in Nigeria, a record N9.60 trillion equities trading in first half to June 30 more than doubles the transaction values recorded during the same period in year 2025 when it stood at N4.193trillion.

At the close of trading on December 31, 2025, Nigeria’s equities market capitalisation stood at approximately N99.38 trillion while as of July 30, 2026, the equities market capitalisation stood at approximately N158.34 trillion, marking a massive expansion driven by the year’s strong market rally.

Driven by aggressive buying, robust corporate earnings, and surging market liquidity, the Nigerian stock market witnessed an extraordinary wealth expansion, adding over N60 trillion in capitalisation within a matter of months into 2026.

This unprecedented rally – propelled by stellar performances across the banking, industrial, and consumer goods sectors – underscores a profound shift in investor sentiment on the Nigerian bourse. As investors aggressively reallocate capital toward equities in search of inflation-beating returns, the Nigerian market’s explosive growth highlights a resilient new chapter for West Africa’s leading financial bourse.

The record-breaking market value increase at the Nigerian Exchange Limited in the first half of the year was primarily driven by banking recapitalisation which forced massive capital raising and trading activity in the review period and stock investors interest in high-performing sectors like industrial goods, banking, energy, and consumer goods, which saw unprecedented buy-side momentum.

While domestic players propelled local stocks to historic heights, global heavyweights prioritised the safety and high-yield allure of Nigeria’s short-term debt markets over the explosive upside of its equities – a divergence that highlights a fascinating paradox in frontier market investing.

For over a decade, full-year trading values on the Nigerian exchange hovered between N1.5 trillion and N3.5 trillion. A single half-year total of N9.60 trillion significantly outperforms previous annual totals.

“The strong 47.4 percent return of Nigerian equities in H1’26 highlighted the improved macroeconomic indicators and structural changes in market participation. To the latter, PenCom revised the investment threshold for Pension Fund Administrators (PFA) participants, which materially improved market participation and contributed to the valuation re-rating observed through the period.

“Similarly, FTSE Russell announced a potential re-inclusion of Nigeria into its Frontier Market Index in September (now under review), reinforcing positive market sentiment and attracting renewed foreign investor interest,” CardinalStone research analysts said in their 2026 mid-year asset allocation guide.

“We expect aggressive government borrowing to keep the NTB rate sticky at current levels of 20 percent-22 percent in second half (H2) 2026 and bonds at 17 percent-19 percent. For our H2’26 expected return for the Nigerian equities market, we employed the Grinold-Kroner model.

“The model implies an expected market return of 24.9 percent for H2’26. Overall, our base expectation for domestic equities is a recovery from June lows, backed by stability in the currency, improved corporate earnings, and continued participation from

foreign portfolio investors,” CardinalStone analysts further said.

Global index provider FTSE Russell recently placed its planned reclassification of Nigeria back to Frontier Market status under “further review” saying that the decision is to allow the index provider to thoroughly assess how Nigeria’s recent transition to a shortened T+1 settlement cycle (clearing and settling trades one business day after execution) affects international institutional investors.

But Nigeria’s capital market received a boost after S&P Dow Jones Indices (S&P DJI) placed the country on its 2027 Watchlist for possible reclassification from a standalone market to a frontier market, move market operators say validates years of regulatory and infrastructure reforms.

On June 1, the Nigerian capital market completed the final leg of a deliberate, multi-year modernisation of its post-trade architecture, becoming the first market in Africa to settle securities one business day after the trade date. The transition followed a disciplined sequence: the migration from T+3 to T+2 on November 28, 2025, and then to T+1 barely six months later.