Nigeria’s Capital Market: A Journey of Growth and Challenges
As Nigeria celebrates 65 years of nationhood, the capital market has undergone significant transformations. Despite achieving notable milestones, the sector still faces challenges that hinder its full potential. Experts have highlighted key reforms such as indigenisation, privatisation, banking consolidation, automation of trading, and regulatory evolution as pivotal moments in the market’s development. However, persistent issues like low liquidity, foreign exchange volatility, limited listings, and weak policy incentives continue to pose obstacles.
The Market Capitalisation to GDP Ratio
A critical benchmark for evaluating the depth and vibrancy of a capital market is the market capitalisation to Gross Domestic Product (GDP) ratio. In Nigeria, this ratio remains below 20 per cent, significantly lower than the 50 per cent standard observed in more developed markets. This gap highlights the urgent need for new listings, stronger policies, and structural reforms to deepen the market.
Olatunde Amolegbe, Managing Director of Arthur Stevens Asset Management Limited, noted that while the Nigerian capital market has evolved remarkably over the last six decades, its current state reveals untapped opportunities. He pointed out that the transition from a one-exchange country to one with multiple exchanges trading in multiple asset classes represents significant progress. However, he emphasized that with less than 20 per cent of GDP represented by the capital market, the gap is too wide for a country with Nigeria’s population and economic potential.
NGX Records N6.9tn Equity Trades
The Nigerian Exchange (NGX) recorded total equity transactions worth N6.92tn between January and August 2025, reflecting increased foreign portfolio participation and sustained dominance by domestic investors. According to the latest domestic and foreign portfolio participation report released by the NGX, foreign investors accounted for 21.01 per cent of the total value, translating to N1.45tn, while domestic investors contributed 78.99 per cent, amounting to N5.46tn.
A breakdown of the 2025 figures showed that March recorded the highest foreign inflows at N0.70tn, representing 62.74 per cent of total trades for that month, the strongest foreign showing in over three years. July also witnessed significant activity with N1.82tn worth of equity trades, of which foreign investors accounted for N0.15tn, while domestic transactions stood at N1.67tn.
Year-on-Year Trend
In comparison, the 2024 full-year report showed total transactions of N5.59tn, with foreign investors accounting for 15.25 per cent, or N0.85tn, and domestic investors contributing N4.73tn, or 84.75 per cent. The figures represented a sharp rebound from 2023, when total trades closed at N3.58tn, with foreign participation at 11.48 per cent, or N0.41tn, and domestic at 88.52 per cent, or N3.17tn.
Analysts note that while domestic institutional investors have consistently driven market volumes, foreign inflows in 2025 signal renewed investor confidence amid ongoing economic reforms. Between January and August 2025, domestic retail investors contributed N2.33tn, while institutional investors accounted for N3.13tn. On the foreign side, inflows were put at N0.70tn, while outflows stood at N0.75tn.
Reforms, Setbacks, and Prospects
Charles Sanni, Chief Executive Officer of Cowry Treasurers Limited, highlighted the role of government policies, banking reforms, and foreign exchange management in shaping the performance of Nigeria’s capital market over the past decades. He stressed that the right policy environment and political stability will determine the growth of the market in the years ahead.
Reflecting on Nigeria at 65, Sanni explained that policies introduced at different periods in the country’s economic history have provided both opportunities and challenges for investors. He noted that one of the early defining reforms was the introduction of rules on insider dealing, which enhanced transparency and strengthened investor confidence in the market.
Indigenisation Decrees of 1972 and 1978
David Adonri, a stockbroker and Vice Chairman of Highcap Securities, outlined the monumental events that have shaped Nigeria’s capital market over the past six decades. He stressed that while the market has played a critical role in national development, more deliberate efforts are needed to align capital formation with the country’s strategic needs.
Adonri recalled that the journey began with the establishment of the Lagos Stock Exchange through an Act of Parliament in the early 1960s. He explained that following the report of economist Pius Okigbo in the 1970s, the Exchange was transformed into the Nigerian Stock Exchange with branches spread across the country, thereby widening access to capital raising.
Market Performance and Global Recognition
Despite these challenges, Adonri stated that Nigeria’s capital market has, on several occasions, ranked among the best-performing markets in the world in terms of returns. Although not as deep as South Africa’s, he described it as widely acclaimed for safety, liquidity, and profitability, making it the second most active market in Africa.
Role in Economic Growth and Transformation
Adonri emphasised that the Nigerian capital market has consistently fulfilled its dual roles of mobilising capital for economic growth and serving as a safe, liquid, and profitable investment outlet for investors. He pointed to success stories enabled by the market, citing Nigeria’s banking recapitalisation programme and the rise of industrial giants such as the Dangote Group.
Call for Strategic Alignment
Looking ahead, Adonri stressed that while the market has done well in mobilising funds, its impact on Nigeria’s economic transformation has not been maximised. He urged government and stakeholders to work together to ensure that capital formation is strategically directed at areas of national need.
Expert Opinion
Charles Sanni, CEO of Cowry Treasurers Limited, noted that while government policies have helped stabilise the economy and slowed down inflation, the gains have yet to translate into real prosperity for Nigerians. He expressed concern over the country’s rising debt profile, stressing that aggressive borrowing could undermine long-term growth.
