Why Nigeria’s stock market can’t handle big money

A $5 million equity investment by Norway’s sovereign wealth fund, the Government Pension Fund Global (GPFG), into BUA Cement is scarcely feasible on the Nigerian Exchange (NGX). This is because, when adjusted for its free float, BUA Cement’s market capitalization stands at just $41.3 million.

GPFG, which holds approximately 1.5% of the world’s total equities, amounting to around $1.38 trillion, is invested across 45 equity markets, including four in Africa: South Africa, Egypt, Kenya, and Morocco. However, a single $5 million transaction from GPFG into the NGX could significantly sway the entire market, highlighting the shallow depth that often deters institutional investors.

 Free float refers to the portion of a public company’s issued shares that are readily available for trading on the stock exchange. These are shares not held by insiders or strategic investors.

For example, AB InBev, the global brewing giant, holds a 97.7 percent stake in International Breweries, leaving just 2.3 percent of the company’s shares available for public trading on the NGX. As a result, International Breweries has a 2.3 percent free-float percentage. On April 25, a buy offer for just 2.4 million shares, representing only 0.014 percent of the company’s total shares, was enough to cause a 10 percent jump in both the share price and market capitalization. This highlights the price volatility that can arise from limited free float.

The NGX 30 Index tracks the 30 most capitalized stocks on the Nigerian Exchange. As of May 23, it accounts for about 92 percent of the entire market’s capitalization, estimated at N63.4 trillion.

Yet only N17.5 trillion of that is classified as free float. That’s just 28 percent—or roughly $10.9 billion, of the market’s most valuable stocks available for public trading. This limited availability significantly constrains market liquidity. For institutional investors seeking depth, it presents a serious challenge. Despite ongoing efforts to grow the market and improve access, the low free float in many listed companies continues to hamper liquidity, transparency, and investor participation.

State of free float on the NGX 

The Nigerian Exchange (NGX) enforces tiered free float requirements, depending on the listing board.

On the Premium Board, companies must maintain a minimum free float of 20 percent of issued share capital or have free float shares valued at N40 billion, held by at least 300 shareholders.

The Main Board requires the same 20 percent or a minimum value of N20 billion, also with at least 300 shareholders.

On the Alternative Securities Market (ASeM) Board, companies must meet either a 15 percent minimum or a free float worth N50 million, held by at least 51 shareholders.

The Growth Board has two segments: the Entry Segment requires a 10 percent free float held by at least 25 shareholders, while the Standard Segment requires 15 percent held by 51 shareholders or a minimum float value of N50 million.

Most listed companies meet these requirements. At present, only International Breweries, with a free float value of N3.35 billion, and Champion Breweries, with a 3.58 percent free float, are non-compliant. Still, the volume of free float across the market remains a concern when evaluating NGX’s overall liquidity.

Within the NGX 30 Index, Access Holdings holds the highest turnover ratio in 2025 at 0.086 percent. As of May 23, its average daily trading value stood at N988.5 million. Interestingly, this trails GTCO Holdings, which has a higher daily trading value of N1.34 billion but a lower turnover ratio of 0.056 percent.

Despite their strong performance on the NGX, both banking stocks lag behind regional peers. For example, South Africa’s Absa Group, listed on the Johannesburg Stock Exchange (JSE), posted a turnover ratio of 0.45 percent over the same period—far higher than their Nigerian counterparts.

Still, Access and GTCO are among the most liquid stocks on the NGX. This status is largely due to their relatively high free float. It underscores a key point: while their turnover ratios may seem modest compared to peers across Africa, their higher tradability on the NGX highlights the critical role of free float in enhancing market liquidity.

Top 10 most capitalized stocks and their turnover ratios 

Airtel Africa, with a market capitalization of N8.1 trillion, has a free float of 23.3 percent. This year, it posted a turnover ratio of 0.0002 percent, making it the most illiquid stock among the NGX 30. For Airtel, this illiquidity is linked to more active trading on the London Stock Exchange.

BUA Foods, with a N7.52 trillion market cap, has a 4.73 percent free float valued at N355.5 billion. Its turnover ratio this year is 0.001 percent. The limited free float has worsened its illiquidity on the exchange.

Dangote Cement, with a market cap of N7.4 trillion and a 4.63 percent free float, has posted a turnover ratio of 0.0027 percent. Like BUA Foods, its low free float contributes to its illiquidity.

MTN Nigeria, valued at N5.67 trillion, has a stronger free float of 26.8 percent—equivalent to N1.5 trillion in tradable shares. Its turnover ratio stands at 0.019 percent, reflecting relatively better liquidity.

Seplat Energy, with a market cap of N3.29 trillion and a 28.1 percent free float, recorded an average daily trading value of N286 million in 2025, yielding a turnover ratio of 0.009 percent. Much of its trading activity, however, occurs on the London Stock Exchange.

Geregu Power, with a N2.85 trillion market cap, has a lower free float of 16.85 percent (N481 billion). Yet with an average daily trading value of N755 million, it boasts a relatively high turnover ratio of 0.0265 percent.

BUA Cement follows, with a N2.83 trillion market cap and a very low free float of 2.63 percent. Unsurprisingly, it is among the most illiquid NGX stocks, with a turnover ratio of 0.0017 percent.

Transcorp Power, valued at N2.46 trillion, has a free float of 7.47 percent. Its turnover ratio stands at 0.005 percent, which aligns with its limited tradable shares.

GTCO Holdings, with a N2.39 trillion market cap, boasts one of the highest free floats on the NGX at 95.4 percent. It is among the most actively traded equities, with a turnover ratio of 0.056 percent.

Aradel Holdings, with a N2 trillion market cap and a 64.32 percent free float, is the most actively traded oil and gas stock on the exchange. Its average daily trading value is N765 million, corresponding to a turnover ratio of 0.038 percent.

A case for free float reforms 

With just 28 percent of the NGX 30’s market capitalization available for public trading, liquidity constraints heighten volatility risks. On the NGX, executing large trades often causes significant price movements, posing a major barrier for institutional investors seeking stability and depth.

In contrast, South Africa’s Johannesburg Stock Exchange (JSE) boasts a much higher free float of 73 percent. This stark difference points to the urgent need for structural reforms in Nigeria’s capital markets. Enhancing free float across the NGX could significantly improve liquidity, investor confidence, and the overall efficiency of the market.