January 21, 2026/CSL Report
Equities and Fixed Income Outlook
The Nigerian equities market delivered an exceptional performance in 2025, reaffirming its position as one of the strongest-performing frontier markets globally. The NGX All-Share Index (ASI) advanced by 51.2% year-on-year to close at 155,613 points, while total market capitalisation expanded by approximately ₦36.6 trillion to ₦99.3 trillion. This rally was underpinned by credible macroeconomic and foreign-exchange reforms, a valuation re-rating from historically depressed levels, resilient corporate earnings growth, and improving market liquidity. Rising domestic participation, alongside a gradual recovery in foreign portfolio inflows, further reinforced market momentum. Market activity strengthened materially during the year, with total trading volumes rising by 20.8% y/y and total value traded increasing by 49.3% to ₦4.0 trillion. Nigeria significantly outperformed key global benchmarks, exceeding returns recorded by frontier, emerging, and developed market indices, highlighting its relative attractiveness within the global equity allocation framework.
Sector performance was broad-based, reflecting strong investor participation across the market. The Consumer Goods sector led performance, supported by easing FX pressures and strong stock-specific re-ratings, while the Insurance sector benefited from regulatory reforms under the Nigerian Insurance Industry Reform Act (NIIRA 2025). Banking and Industrial Goods stocks also delivered solid gains, demonstrating earnings resilience despite regulatory headwinds. In contrast, the Oil & Gas sector lagged modestly, reflecting mixed sentiment amid volatile global crude oil prices. From a valuation perspective, Nigerian equities remain compelling. The market closed 2025 at a P/E multiple of 6.5x, representing a significant discount to both African peers and broader emerging and developed markets, as well as to its own five-year historical averages. This valuation gap suggests scope for further upside, particularly if earnings growth remains intact and reform momentum is sustained.
Domestic investors continued to dominate trading activity, accounting for approximately 79% of total transaction value, although foreign participation improved meaningfully during the year. Looking ahead to 2026, market returns are expected to be positive but more moderate, with performance increasingly driven by earnings growth, sector rotation, and stock selection rather than broad multiple expansion. The successful execution of banking and insurance sector recapitalisation, continued infrastructure spending, easing fixed-income yields, and stabilisation in the FX market are expected to provide key support for equities. Under the base-case scenario, the NGX ASI is projected to rise by approximately 34.1% to 208,713.52 points by year-end 2026.
However, downside risks remain, including pre-election uncertainty, oil price volatility, potential fiscal pressures, and shifts in global risk sentiment. Overall, Nigerian equities offer an attractive risk-reward proposition for both domestic and international investors, supported by strong earnings prospects, improving macro fundamentals, and a sustained valuation discount relative to peers. Many stocks remain attractively valued and within our coverage universe, we have Buy recommendations on Accesscorp, UBA, GTCO, Zenith Bank, MTNN, Airtel Africa, Dangote Cement, Lafarge Africa, Nestle, UACN, Unilever, and Cadbury.
For the fixed income market, outlook for 2026 remains cautiously constructive, supported by improving macroeconomic fundamentals but tempered by fiscal and policy-related risks. Economic growth is expected to strengthen and inflation to moderate gradually; however, interest rates are likely to remain relatively elevated in the near term, reflecting the Central Bank of Nigeria’s cautious stance. Market expectations suggest that the first policy rate cut may occur around mid-2026, implying that meaningful yield compression is more likely in the second half of the year. In the interim, yields, particularly at the short end of the curve, are expected to remain sticky, with the reintroduction of the 10% withholding tax and capital gains tax considerations reducing the after-tax attractiveness of short-dated instruments for taxable investors, despite their continued appeal for liquidity and capital preservation.
The belly of the yield curve is expected to offer the most attractive risk-adjusted returns, supported by strong structural demand from pension funds and sustained offshore interest driven by attractive carry, improving sovereign credit fundamentals, and enhanced policy credibility. The potential re-inclusion of Nigeria in major emerging market bond indices represents an additional upside risk that could support demand and compress yields. Nonetheless, elevated domestic borrowing requirements pose a key risk, potentially keeping yields higher for longer, particularly at the belly and long end of the curve. In this environment, a flexible or barbell strategy combining selective mid-tenor exposure with short-dated instruments may be prudent. In the Eurobond market, supportive external buffers and the prospect of further rating upgrades underpin a positive outlook, although elevated debt service costs, global risk sentiment, and possible reform fatigue remain important downside risks.
To download the full report, please click on the link below.
CSL Research – 2026 Equities and Fixed Income Outlook.pdf
