Naira rally lifts Nigeria stocks to Africa’s top spot 

…NGX up 34.4% in dollar terms
…Analysts see more upside for undervalued stocks

Nigeria is officially the best stock market in Africa right now, riding on the back of a strong naira, foreign investor appetite, and a bull market run to become the continent’s top performer in 2026.

BusinessDay analysis of the data from African Markets, a real-time market intelligence platform, shows the benchmark index gained 34.4 percent in dollar terms year-to-date as of February 20. The All-Share Index (ASI) stood at 194,989.8 points, with market capitalisation at N125.2 trillion ($92.9 billion), the highest showing among 17 African bourses tracked.

The surge marks a sharp turnaround for the West African nation’s stock market, which ranked fourth on the continent last year and trailed Zimbabwe and Tanzania earlier in February. It also underscores improving macro stability following sweeping foreign exchange reforms.

On January 5, 2026, the market crossed the N100 trillion ($70 billion) mark for the first time, implying a $22.9 billion increase in dollar market value so far this year.

Read also: FX losses erase insurers’ 2025 profit gains

“The reforms implemented over the past two years have strengthened investor confidence, reflecting improving macro conditions and stronger corporate profitability,” said Gbolahan Ologunro, associate portfolio manager at First Asset Management. “Companies — particularly in the real and cyclical sectors — have responded positively to FX stability and more subdued inflation.”

He noted that declining FX losses have supported earnings growth and boosted investor appetite for equities, while recent National Pension Commission guideline changes have encouraged additional flows by giving pension funds more room to increase equity allocations.

“In addition, the naira’s roughly nine percent year-to-date appreciation has amplified dollar returns,” Ologunro said.

Bloomberg reported last week that the country’s benchmark gauge had surged 31 percent this year, delivering the world’s second-best dollar returns — well ahead of the 11 percent gain in the broader emerging-market index and the 6.4 percent advance in frontier markets.

Currency strength drives flows

Currency strength has been central to the story. The naira is now the world’s second-best-performing currency this year among those tracked by Bloomberg, gaining more than seven percent against the dollar. The rebound has lifted dollar-denominated equity returns and restored investor confidence after the sharp devaluation in 2024.

Last October, the naira exited the continent’s top 10 weakest currencies for the first time in nearly two years, supported by stronger reserves, policy reforms, and improved FX liquidity. The currency ranked 11th weakest at about N1,401 per dollar in January but strengthened to around N1,346 as of Friday.

Foreign participation is already responding. Non-Nigerian trading in local equities jumped to a 19-year high in 2025, according to NGX data, with foreign transactions more than tripling to N2.65 trillion ($1.97 billion) from N852 billion a year earlier — the strongest level since 2007.

According to Ayokunle Olubunmi, head of financial institutions ratings at Agusto & Co, the rebound reflects a recovery from a very weak base, with confidence gradually returning to the economy and corporate profitability improving.

“The recent adjustment to Pension Fund Administrators’ guidelines has been a major catalyst, as PFAs — one of the largest investor groups — now have more room to increase equity exposure, injecting fresh liquidity into the market,” Olubunmi said.

He added that falling fixed-income yields are also pushing investors toward equities, while expectations of possible rate cuts later in the year are reinforcing the bullish outlook.

Read also: FG plans liquidity controls as oil, tax reforms lift inflows

Beyond FX stability, domestic institutional flows are providing powerful support. Recent policy adjustments by PenCom— which raised equity investment limits — have unleashed fresh demand from pension funds.

In the week to February 13 alone, the market gained N6.79 trillion (6.16 percent). With total pension assets at N27.6 trillion as of December 2025, even modest reallocations are capable of moving the market significantly. Analysts say the NGX is now experiencing one of its most aggressive liquidity-driven bull runs in years.

“A clear rotation dynamic is already emerging within the equity space. Pension funds adhere to strict investment criteria, prioritising large free floats, consistent dividend histories, robust corporate governance, and adequate liquidity,” analysts at Comercio Partners said in a recent note.

“As a result, new inflows are concentrating in precisely those companies that align with these profiles. Banking and broader financial services names are immediate beneficiaries, given their high liquidity, substantial free floats, and dividend appeal,” they added.

Vetiva analysts also flagged a quality rotation. “The market is currently witnessing a sharp flight to quality within the energy and pension-weighted stocks,” they said. “While the ASI is at record levels, the negative breadth in the Industrial and Banking sectors suggests that institutional investors are harvesting profits from recent rallies to fund positions in high-alpha names like Seplat.”

Trading momentum accelerates

Market activity reflects the renewed confidence. In the week to February 20, investors traded 7.662 billion shares worth N252.6 billion in 345,118 deals, compared with 4.652 billion shares valued at N193.3 billion in 286,751 deals the previous week, according to the NGX weekly report.

“The Financial Services Industry (measured by volume) led the activity chart with 5.625 billion shares valued at N113.599 billion traded in 129,729 deals: thus contributing 73.41 percent and 44.98 percent to the total equity turnover volume and value respectively,” the report said.

Outlook: momentum vs risks

On sustainability — particularly in a pre-election year — Ologunro of First Asset Management said the rally remains largely supported by improving fundamentals.

“We are still seeing strong FPI inflows, crude oil prices have improved this year, and Nigeria’s oil production is rising. This is positive for oil receipts and supportive of external reserves,” he said.

He added that with the Dangote Refinery now operational, FX demand for PMS imports has declined.

“Overall, the macro picture is broadly positive. As long as the FX market remains stable, we should continue to see strong buying interest in equities. Key risks would be a sharp drop in crude oil prices that could trigger foreign investor risk aversion, or rising election-related uncertainty in the second half of the year. But in the near term, the rally appears sustainable.”

Tony Brown, an Abuja-based banking analyst, struck a more cautious tone, warning of early signs of froth in parts of the market.

“Investor exuberance appears to be rising, and in some cases, the focus on fundamentals is weakening. That could expose some investors to losses and potentially trigger bouts of profit-taking or market corrections,” he said.

However, he noted that many fundamentally strong companies have repaired their balance sheets after the devaluation shock and returned to profitability.

“Share prices of companies such as MTN, Airtel, Seplat, Dangote Cement, Okomu Oil and Presco have risen significantly on the back of strong earnings. With ongoing reforms, improved macro conditions, and a more positive economic outlook for Nigeria, the broader market narrative remains constructive,” Brown added.

Peers also advance

Elsewhere on the continent, Tanzania ranked second with its DSE ASI rising 33.4 percent, supported by strong economic growth, policy consistency, and high-yield banking stocks. A 246 percent year-on-year surge in new Central Depository System accounts in early this year signals rising investor participation.

Zimbabwe’s ZSE ASI, up 31.8 percent, placed third, reflecting currency stabilisation under the ZiG framework, easing inflation, and renewed foreign interest. The Victoria Falls Stock Exchange has also gained strongly, with market capitalisation nearing $1.7 billion.

Ghana ranked fourth as its GSE-CI advanced 28.55 percent, buoyed by stronger banking stocks, lower fixed-income yields, and improving macro stability following its domestic debt restructuring.

Egypt completed the top five, with the EGX 30 rising 21.7 percent to 50,667.67 points and total market capitalisation reaching EGP 3.257 trillion ($66 billion), supported by foreign inflows, easing inflation, and stronger private investment.