CBN Projects More Equity Inflows, Warns Of Banking Sector Concentration Risk

Nigeria’s capital market is expected to sustain its bullish momentum through 2026, driven largely by the ongoing banking sector recapitalisation programme, rising investor confidence, and supportive policy measures, according to the Central Bank of Nigeria (CBN).

In its latest outlook report, the apex bank said the recapitalisation exercise, scheduled for completion by the end of the first quarter of this year, has continued to stimulate trading activity and attract fresh equity inflows, reinforcing positive sentiment in the market.

The CBN noted that improved macroeconomic stability, clearer regulations and enhanced foreign exchange liquidity have combined to boost both domestic and foreign participation in equities.
However, the bank cautioned that the strong influence of the banking sector could heighten concentration risk in the market.

It warned that prolonged capital raising by banks may lead to investor fatigue and potentially crowd out issuers from other sectors, even as overall market sentiment remains positive.

Despite these concerns, the CBN said several initiatives are expected to broaden participation and attract new entrants into the capital market.

These include the Nigerian Exchange’s technology-driven strategy and its collaboration with the Federal Ministry of Industry, Trade and Investment, the zero per cent capital gains tax for small businesses, and the N150 million capital gains tax exemption for retail investors.

The apex bank also flagged global economic uncertainties as a potential downside risk, noting that unanticipated external shocks could weaken investor confidence and disrupt the current bullish trend.

The Nigerian capital market recorded a strong performance throughout 2025, underpinned by robust corporate earnings, relatively stable macroeconomic conditions and attractive equity returns, which encouraged a shift from fixed income securities to equities.

According to the report, the improved outlook drew increased foreign portfolio inflows, reflecting renewed international confidence in the market.

Data from the CBN showed that the All-Share Index (ASI) rose by 42.82 per cent to close at 147,000 points in 2025, compared with 102,926.40 points in 2024. Aggregate market capitalisation also expanded by 36.36 per cent to N149.00trn from N109.27trn in the preceding year, driven by strong performance in the Industrial, Banking and Consumer Goods sectors.

Equities remained the dominant asset class, accounting for N88.57tn, or 63.80 per cent, of total market capitalisation. The debt market represented 36.17 per cent, while Exchange Traded Funds (ETFs) contributed a marginal 0.03 per cent, underscoring the market’s equity-led growth profile.

Trading activity was notably higher in 2025, with equities turnover estimated at N8.38trn, up from N2.60trn in the previous year.

The CBN attributed the surge largely to heightened activity linked to the banking sector’s recapitalisation drive.

Overall transaction value and volume rose by 40.90 per cent and 9.84 per cent to N4trn and 152 billion units, respectively, while the number of deals increased by 78.26 per cent to 1.77 million. Market breadth was largely positive, as gainers consistently outnumbered losers, signalling broad-based buying interest and sustained momentum.

Domestic investors accounted for 88.0 per cent of market participation, slightly lower than 90.0 per cent in 2024, while foreign participation increased to 12.0 per cent from 10.0 per cent, highlighting growing international interest in Nigerian equities.

The CBN said the favourable market fundamentals, if sustained, are likely to support continued equity inflows and reinforce the capital market’s growth trajectory in the medium term.

CBN Projects More Equity Inflows, Warns Of Banking Sector Concentration Risk is first published on The Whistler Newspaper