Analysts expect the Nigerian Exchange (NGX) to deliver further wealth creation opportunities in 2026, supported by improving macroeconomic indicators, resilient corporate earnings, and attractive market valuations, despite technical signs that the market remains overbought.
With equities market capitalisation approaching ₦100 trillion, the NGX ended 2025 on a strong footing, extending a rally that rewarded investors willing to take on risk amid Nigeria’s challenging inflationary environment.
The benchmark All-Share Index closed the final trading session of 2025 at 155,613.03 points, representing a full-year gain of 51.20 per cent and marking the highest level recorded since 2020.
Market momentum remained robust throughout the year, punctuated by periodic profit-taking episodes that failed to derail the broader bullish trend. Analysts noted that the equities market served as a hedge against Nigeria’s double-digit headline inflation, drawing increased investor participation.
In a market commentary, Meristem Securities Limited said valuation metrics continue to support a positive outlook for Nigerian equities, particularly when assessed against historical averages and global peers.
The investment firm explained that the market’s price-to-earnings (P/E) ratio, currently at 6.92x, remains well below its five-year average of 10.65x and its ten-year average of 11.30x. The NGX also trades at a significant discount to MSCI frontier, emerging, and developed market averages of 11.50x, 16.80x, and 24.80x respectively.
When compared with select Sub-Saharan African and global markets, Nigeria’s valuation remains relatively attractive. Ghana trades at 7.86x, Egypt at 8.47x, South Africa at 16.28x, Singapore at 14.00x, India at 24.30x, and Malaysia at 24.30x.
Despite the NGX-ASI posting a 51.19 per cent gain in 2025, the market’s P/E multiple declined by 32.49 per cent from 10.25x in 2024 to 6.92x, suggesting that price gains were largely driven by strong earnings growth rather than valuation expansion.
Meristem Securities said this trend underscores the resilience of corporate fundamentals across sectors.
Technical indicators also show elevated market conditions. Using the 30-day Relative Strength Index (RSI), which stood at 67.42x, analysts noted that the market remained in overbought territory throughout 2025. However, they emphasised that this did not prevent sustained gains over the year.
Looking ahead, the firm expects earnings growth to play a more dominant role in driving returns in 2026, potentially leading to further moderation in valuation multiples.
“Our outlook for the local bourse remains constructive,” Meristem said, adding that expectations of strong earnings performance across key sectors underpin projections for additional market gains.
The firm reported that earnings recovery was broad-based in 2025, supported by Nigeria’s improving macroeconomic environment. The NGX-ASI’s nine-month 2025 earnings per share grew by 94.75 per cent year-on-year, significantly outperforming Meristem’s forecast of 56.50 per cent.
Analysts attributed the performance to strong pricing power, improved cost management, and enhanced operational efficiency. Further recovery is expected in consumer goods and industrial goods sectors as real incomes improve and demand strengthens.
Financial services companies are also projected to benefit from larger capital buffers and higher interest income, while insurers are expected to see gains from reform-driven underwriting improvements, despite moderating foreign exchange gains.
In the oil and gas sector, modest growth is anticipated in 2026, driven mainly by upstream resilience, although downstream operators may continue to face margin pressure from competitive dynamics.
Meristem also expects improved earnings to translate into higher dividend payouts, particularly among companies that suspended dividends in previous years due to weakened profitability.
Several sectors remain attractively priced relative to historical benchmarks, creating opportunities for investors positioning ahead of 2026. Banking, industrial goods, telecommunications, and consumer sectors are among those expected to benefit most from earnings momentum and supportive demand conditions.
The firm added that a continuation of disinflation trends, currency stability, and potential easing of policy rates could further lift investor sentiment and equity valuations in the year ahead.
