The Nigerian stock market entered the second half of 2026 on weaker footing after one of its strongest first-half performances in recent history, raising a critical question for investors: is the recent selloff the start of a prolonged downturn or simply a pause before another rally?
Market analysts believe it is the latter. While they expect volatility to persist in the coming weeks, they argue that the market’s underlying fundamentals remain intact. Strong half-year corporate earnings, improving macroeconomic conditions and the anticipated listing of Dangote Refinery and Petrochemicals are expected to provide fresh momentum for equities.
Their optimism follows an exceptional first half in which the Nigerian Exchange Limited (NGX) outperformed many frontier and emerging markets despite elevated inflation, high interest rates and global uncertainty.
The NGX All-Share Index (ASI) climbed from 156,492.36 points at the beginning of January to 229,419.18 points on June 30, delivering a year-to-date return of 47.43 per cent. Market capitalisation also expanded from ₦99.94 trillion to ₦147.22 trillion, representing a 48.14 per cent increase within six months.
The rally was broad-based, led by the oil and gas index with an 87.62 per cent gain, followed by the industrial index at 79.02 per cent. The commodity index rose 48.25 per cent, banking advanced 33.46 per cent, and consumer goods gained 15.33 per cent. Insurance was the only sector to finish in negative territory, declining 9.54 per cent.
Among individual stocks, SCOA emerged as the biggest gainer with a 365.49 per cent return, followed by UNIONDICON, Berger Paints, RT Briscoe and Red Star Express. ALEX recorded the steepest decline, followed by Sovereign Trust Insurance, Wapic Insurance, UPDC and Ellah Lakes.
The market achieved these gains despite inflation rising from 14.45 per cent at the start of the year to 15.93 per cent by May, while GDP growth stood at 3.89 per cent in the first quarter. During the period, the Monetary Policy Rate, that is the benchmark interest rate, was lowered by 50 basis points to 26.5 per cent, the naira strengthened and external reserves improved, helping sustain investor confidence.
Correction or Buying Opportunity?
Managing Director of Financial Derivatives Company, Bismarck Rewane, believes the recent weakness should be viewed as a normal market correction rather than the beginning of a bear market.
“The reality is that the market has to be viewed in context,” he said, noting that investors who entered the market in January were still sitting on gains of about 45 per cent despite the recent pullback.
According to him, the current decline is being driven more by expectations than deteriorating fundamentals.
“We had strong first-quarter earnings, while second-quarter results are yet to be released. What is happening now is more speculation than fundamentals,” he said.
Rewane believes liquidity is temporarily leaving the secondary market as investors position for the expected Dangote Refinery IPO. Pension funds have been cleared to invest in the offer, while banks’ recapitalisation has increased the supply of listed shares.
“If pension funds stop buying listed shares to preserve liquidity for the IPO, demand for existing stocks weakens. At the same time, the supply of shares has increased following the banks’ recapitalisation exercise. With supply rising and demand falling, share prices naturally come under pressure.”
He also pointed to the attraction of treasury bills, whose yields are significantly higher than average dividend yields on blue-chip stocks.
Still, he does not expect the correction to last. “I do not expect a sharp plunge in the market,” Rewane said. “As companies begin releasing their half-year results, many of those earnings should provide support for share prices.”
He expects the current weakness to persist through July before easing as earnings are released and market uncertainty subsides.
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The Director of the Institute of Capital Market Studies at Nasarawa State University, Uche Uwaleke, also believes the market enters the second half from a position of strength.
“I think we are winning. Nigeria is winning,” he said. “Performance has been above average.”
He cited stronger GDP growth, improvements in agriculture and manufacturing, a trade surplus, more than $10 billion in capital importation during the first quarter and stronger foreign exchange reserves as evidence that macroeconomic conditions have improved despite inflation remaining elevated.
According to Uwaleke, the banking recapitalisation exercise was the biggest catalyst for the market in the first half of the year.
“The major driver of the market in the first half of the year was bank recapitalisation,” he said. “Investors expected banks that successfully raised fresh capital to generate stronger returns in the future.”
He said the rally was also supported by strong corporate earnings, attractive valuations and increased participation by foreign investors, who continued to view Nigerian stocks as relatively cheap.
Why Experts Still Expect Gains
Although profit-taking has slowed the rally, Uwaleke believes opportunities remain in several sectors.
He expects banking stocks to remain attractive as new regulatory requirements for bank holding companies could trigger another round of capital raising. He also sees industrial companies, particularly cement producers, benefiting from government capital projects, while upstream oil and gas companies are expected to remain attractive because of their earnings potential.
Rather than reacting to short-term market swings, he urged investors to adopt what he calls the “DHL approach”—diversify investments, hedge risks and maintain a long-term investment horizon.
“The stock market rewards patience and discipline,” he said. “Investors should focus on companies with strong fundamentals, consistent earnings and a track record of dividend payments.”
For the Managing Director of HighCap Securities Limited, David Adonri, the market’s impressive first-half performance reflects the cumulative impact of economic reforms introduced over the past few years.
He traced the rally to the implementation of the Petroleum Industry Act, the removal of fuel subsidies, the floating of the naira and other reforms that improved investor confidence.
“Investors focused on the long-term outlook rather than the immediate impact,” he said. “They saw the future potential of the reforms and moved into equities.”
Adonri noted that the rally became so strong that many market participants began to worry it had become unsustainable after the All-Share Index crossed several historic milestones.
Despite the recent decline, however, he believes investors should not mistake the correction for a structural collapse.
“What we are witnessing now is a major market correction following an extended and exceptionally strong rally,” he said. “After such a rapid rise, corrections are normal because they remove excessive optimism from stock valuations.”
Corporate Earnings, Dangote IPO Hold the Key
The three analysts agree that the direction of the market in the second half will depend largely on corporate earnings and the expected Dangote Refinery IPO.
Adonri expects stronger half-year earnings to restore confidence, although he cautions that the recovery is unlikely to mirror the extraordinary gains recorded in the first half because investors are raising cash for the refinery offer, inflation remains elevated and global uncertainties persist.
“The major drivers of the market in the second half will be strong corporate earnings and the expected listing of Dangote Refinery and Petrochemicals Plc,” he said. “That listing has the potential to be a game changer for the Nigerian capital market.”
Rewane shares that view, arguing that liquidity currently being held back for the IPO will eventually return to the market once uncertainty fades, and companies begin releasing stronger earnings.
Taken together, the views of Rewane, Uwaleke and Adonri point to a common conclusion. While the remarkable gains recorded in the first half may not be repeated immediately, they do not expect the recent decline to develop into a prolonged bear market.
Instead, they see the current weakness as a temporary adjustment driven by profit-taking, portfolio repositioning and anticipation of the Dangote Refinery listing. If corporate earnings remain resilient and macroeconomic reforms continue to improve investor confidence, the Nigerian stock market is expected to regain momentum in the second half of 2026, even if the journey is more measured than the rally that defined the first six months of the year.
Alex is a business journalist cum data enthusiast with the Pinnacle Daily. He can be reached via ealex@thepinnacleng.com, @ehime_alex on X