July 1 (THEWILL) — Nigeria’s equities market entered the second quarter of 2026 on the back of one of its strongest rallies in nearly two decades. By May, the Nigerian Exchange (NGX) had pushed the benchmark All-Share Index (ASI) to a record 252,508.20 points, while market capitalisation climbed to an all-time high of ₦161.80 trillion, extending year-to-date gains beyond 60 percent.
By the close of the month, the ASI had retreated to 229,419.18 points, while market capitalisation fell to ₦147.22 trillion, erasing about ₦14.58 trillion from investors’ holdings in just a few weeks. June alone accounted for approximately ₦13.29 trillion of the losses, making it the largest monthly destruction of shareholder value in the history of the Nigerian Exchange in nominal terms.
The correction triggered widespread concerns that the market’s remarkable rally had begun to unravel. Yet beneath the steep decline was a more structural development. Rather than signalling weakening corporate fundamentals, the second-quarter pullback largely reflected a migration of liquidity away from the secondary market as institutional investors redirected capital towards bank recapitalisation, high-yield fixed-income securities and portfolio rebalancing.
The recapitalisation exercise ordered by the Central Bank of Nigeria (CBN) became one of the defining forces behind market activity during the quarter. Unlike previous capital-raising exercises, banks were prohibited from relying on retained earnings, bonus issues or asset revaluations to meet the new minimum capital thresholds. Fresh cash subscriptions through rights issues, public offers and private placements became the only acceptable route.
According to the Securities and Exchange Commission (SEC), Nigerian banks raised approximately ₦4.65 trillion through recapitalisation offers. While the exercise strengthened bank balance sheets, it simultaneously redirected billions of naira that would ordinarily have remained available for secondary market trading.
The distinction between the primary and secondary markets became particularly significant. Funds committed to rights issues and public offers moved directly into corporate treasuries, leaving considerably less liquidity available for trading already-listed equities. Every naira subscribed to recapitalisation effectively reduced the pool of capital circulating on the trading floor, weakening market depth at a time when investors were also locking in profits after five consecutive months of exceptional gains.
Between January and May, domestic investors remained the dominant force on the NGX, accounting for ₦6.92 trillion, or 87.67 percent, of the ₦7.90 trillion transactions recorded during the period. Foreign investors contributed just ₦973.38 billion, limiting the market’s ability to attract fresh external liquidity as domestic institutional funds became increasingly committed to recapitalisation exercises.
The slowdown became more visible towards the end of June. Official NGX trading data showed weekly equity turnover declining from ₦254.61 billion in the preceding week to ₦134.49 billion, representing a drop of more than 47 percent. On a daily basis, average turnover fell to roughly ₦26.9 billion, well below the ₦35 billion to ₦45 billion frequently recorded during the first quarter, when several trading sessions exceeded ₦87 billion.
The decline in turnover provided one of the clearest indications that liquidity available for ordinary equity transactions had thinned considerably. With fewer buy orders available to absorb selling pressure, relatively modest sell-offs increasingly translated into sharper price declines, amplifying the market correction as June progressed.
The liquidity squeeze was most evident among institutional investors, particularly Pension Fund Administrators (PFAs), insurance companies and large asset managers that collectively account for a substantial share of domestic equity trading.
As longstanding shareholders in Nigeria’s Tier-1 banks, these investors faced a strategic choice during the recapitalisation exercise: participate in rights issues to preserve their ownership stakes or risk significant equity dilution. For most institutions, exercising their pre-emptive rights became unavoidable, prompting a large-scale reallocation of capital from the secondary market to primary capital raises.
The CBN maintained a tight monetary policy stance throughout the quarter, leaving the Monetary Policy Rate (MPR) at 26.50 percent as it sought to rein in inflation and stabilise macroeconomic conditions. Treasury bill yields climbed above 20 percent, while the apex bank intensified liquidity management through Open Market Operations (OMO), reportedly sterilising about ₦7.30 trillion from the financial system in May alone.
For institutional investors, the combination of recapitalisation commitments and elevated sovereign yields reduced the incentive and, in many cases, the capacity to maintain aggressive positions in listed equities.
Data from the National Pension Commission (PenCom) further illustrates the scale of this capital concentration. Total pension assets under management rose to a record ₦31.32 trillion, with approximately ₦17.48 trillion, representing more than half of the portfolio, invested in Federal Government securities. The allocation underscored the growing preference for low-risk fixed-income instruments during a period of elevated interest rates and heightened liquidity demand.
This became increasingly evident on June 24, when the NGX recorded one of its steepest single-day declines in recent years. The benchmark All-Share Index plunged 2.35 percent, shedding 5,668.65 basis points to close at 235,074.54 points from 240,743.19 points in the previous session. The sell-off wiped an estimated ₦3.64 trillion from investors’ wealth in a single trading day as heavyweight stocks, including Dangote Cement, BUA Cement and Geregu Power, led the decline.
Selling pressure extended well beyond the banking sector. Premium Board companies, including Access Holdings, Zenith Bank, UBA, First HoldCo, MTN Nigeria, Seplat Energy, Lafarge Africa and Dangote Cement collectively lost about ₦8.2 trillion in market value during June, falling from roughly ₦61.3 trillion at the end of May to ₦53.1 trillion by month-end.
Similarly, the market’s trillion-naira stocks (SWOOTs) surrendered an estimated ₦11.6 trillion in combined market capitalisation during the month, highlighting the broad-based nature of the correction. One notable exception was Airtel Africa, whose share price rally added more than ₦4 trillion in market value, cushioning what could have been an even steeper market decline.
Although profit-taking, dividend price adjustments and portfolio rebalancing contributed to the sell-off, the breadth of the correction suggests that liquidity, not deteriorating earnings, was the dominant driver. Corporate fundamentals remained largely resilient, with many listed companies continuing to post solid earnings and maintain healthy balance sheets.
The market’s weakness, therefore, reflected a temporary mismatch between supply and demand. As liquidity migrated into recapitalisation exercises and high-yield fixed-income instruments, the secondary market was left with fewer buyers to absorb sustained selling pressure.
Ogochukwu Onwaeze is a writer specializing in business and economic journalism. At THEWILL News Media, she translates market trends, financial developments, and policy shifts into clear and engaging stories.
