Key takeaways:
- Nigerian equities have delivered the highest dollar-based returns of any market in the world this year,
- The Kospi has fallen into a technical bear market
- S&P Dow Jones Indices has placed Nigeria on its 2027 watchlist for potential reclassification to frontier market status
Nigerian equities have overtaken South Korea’s to hand investors the highest dollar-based returns of any market this year, as souring sentiment on artificial intelligence stocks pushes the Asian nation’s world-beating rally into bear territory.
The benchmark index in Africa’s largest oil producer has returned 67% in dollar terms this year, edging out the Kospi’s 66% gain, according to data from 92 global stock exchanges tracked by Bloomberg.
The Kospi fell into a technical bear market this week after shedding 22% since its June 19 peak, as investors pulled back on renewed doubts about whether demand for AI stocks can hold up.
Nigerian stocks, by contrast, have rallied this year on macroeconomic reforms, higher oil prices and improved foreign-exchange supply.
Financial services firms on the Lagos exchange have led the gains, with insurer Fortis Global Insurance Plc delivering returns of 1,400% in dollar terms.
Damilola Okeleye, a Lagos-based trader at Stonex Nigeria Financial Ltd., said Nigerian stocks aren’t riding the same wave as Kospi, since companies on the local exchange have little direct exposure to AI. He pointed instead to domestic factors drawing investors in. “A strong driving force to the gains seen year to date,” Okeleye said, citing Nigeria’s economic reforms and the potential listing of Dangote Petroleum Refinery and Petrochemicals Fze, the continent’s largest crude processor.
What’s driving Nigeria’s stock dollar-bound returns
The naira has gained 4% since January, adding to returns for dollar-based investors on top of the equity gains themselves. That currency stability marks a shift from recent years, when naira volatility often ate into foreign investors’ returns even when local stock prices rose.
Okeleye said the anticipated Dangote Refinery listing has become a particular draw for investors positioning ahead of what would be one of the largest listings in Nigerian market history.
Beyond that single catalyst, broader reforms to the foreign exchange market and monetary policy have improved confidence among both local and foreign investors navigating the Nigerian Exchange.
A view into the recent bearish move
Despite the strong year-to-date performance, Nigerian equities have hit turbulence in recent weeks. The NGX All-Share Index fell 1.21% week-on-week to close at 229,240.34 points, with market capitalization dropping by roughly ₦1.80 trillion ($1.17 billion) to ₦147.10 trillion ($95.5 billion), according to data from Cowry Asset Management Limited.
The pullback trimmed the market’s year-to-date return to 47.31% in naira terms, even as its dollar-based return remains the highest globally. Market breadth was weak during the sell-off, with 21 advancing stocks against 57 decliners.
The Industrial Goods, Consumer Goods and Oil & Gas sectors led the declines, pressured by profit-taking in heavyweight stocks including Dangote Cement, Lafarge Africa and Zenith Bank.
Cowry Asset Management said the market is likely to remain cautiously bearish in the near term, as investors continue locking in gains from the market’s strong year-to-date run.
Elevated interest rates and attractive fixed-income yields may also continue pulling funds away from equities, the firm said.
Nigeria’s push toward frontier market reclassification
Adding to the momentum behind Nigerian equities, S&P Dow Jones Indices has placed Nigeria on its 2027 watchlist for potential reclassification from “Standalone” to “Frontier” market status.
The global index provider cited regulatory reforms aimed at improving transparency, market integrity and accessibility in Nigeria’s capital market.
S&P said it will monitor developments in Nigeria through the remainder of 2026 before deciding whether to proceed with the upgrade during its 2027 Country Classification Annual Review.
The index provider stressed that consistent policy implementation and stronger operational resilience will be necessary before any reclassification is approved.
A frontier market designation would mark a symbolic milestone for Nigeria’s capital market, signaling growing international recognition of reforms carried out in recent years.
It could also widen the pool of global funds eligible to invest in Nigerian equities, since many frontier-market-focused funds are structurally unable to invest in markets classified as standalone.
