Driven by surging valuations and economic reforms, Nigeria’s capital market now accounts for 33% of GDP, with total capitalization up 125% in less than two years, according to the regulator. Structural weaknesses remain, however, particularly in market liquidity and trading depth.

Nigeria's capital market contribution to gross domestic product has risen to 33% from 13% in April 2024, driven by a sharp increase in market capitalization, which now stands at more than 123.93 trillion naira (about $82 billion), the country's regulator said on Sunday.

Securities and Exchange Commission Director General Emomotimi Agama disclosed the figures in Lagos during his inaugural address to members of the Capital Market Liquidity Taskforce. Total market capitalization has climbed from roughly 55 trillion naira in April 2024 to more than 123.93 trillion naira, a gain of 125% in under two years, he said. "These are impressive figures, but they tell only part of the story," Agama said, acknowledging the market's resilience and a recovery in investor confidence since April 2024.

A Surge Driven by the Naira and Reforms

The sharp rise reflects a distinct macroeconomic backdrop. The naira's steep depreciation and persistent inflation have pushed many local investors toward equities to protect their purchasing power, inflating valuations in local currency terms.

Reforms launched since 2023 have also supported the rally. The unification of the exchange rate and the removal of fuel subsidies, flagship measures of the current administration, have reshaped market expectations. For some investors, these steps signaled fiscal discipline and a commitment to macroeconomic stabilization. Several large listed companies, particularly in banking and telecommunications, have seen their share prices surge in what amounts to a post-reform revaluation of assets.

The structure of the Nigerian market has also amplified the move. Highly concentrated, it is dominated by a small number of heavyweight stocks. When those large-cap companies rally, they can lift the broader index and significantly inflate total market capitalization. Moderate economic growth has also supported the market capitalization-to-GDP ratio, reinforcing the increase in the headline figure.

A Larger Market, but Still Illiquid

Agama nonetheless cautioned against focusing solely on size. "A capital market is often described as the barometer of an economy’s health. But for that barometer to be accurate, the market must be more than just large—it must be liquid," he said.

Despite the surge in market capitalization, structural weaknesses persist. Trading remains concentrated in a handful of large-cap stocks, leaving many listed equities thinly traded. High impact costs for institutional investors continue to weigh on transaction efficiency.

Limited liquidity could deter certain investors, particularly if they cannot enter or exit positions without triggering sharp price swings, the SEC said.

Reforms Ahead to Sustain Momentum

To address these concerns, the regulator has launched a taskforce bringing together exchanges, depositories, fund managers and other market operators. The group is mandated to propose reforms aimed at deepening the market, modernizing trading and settlement infrastructure, improving the competitiveness of the settlement cycle relative to other emerging markets, introducing new products including derivatives, and broadening the investor base.

The SEC also aims to attract up to 20 million new retail investors through digitalization, the dematerialization of share certificates and partnerships with fintech firms.

A recently enacted Investment and Securities Act (ISA) 2025, which expands the regulator's supervisory scope to digital assets, now provides a formal framework for certain crypto-related activities and other virtual instruments that previously operated in a regulatory grey area. The SEC said the objective is to bring significant speculative activity into the formal financial system and strengthen investor protection in a country where digital asset adoption ranks among the highest in Africa.

Authorities say they want the rise in market capitalization to translate into sustainable financing for the economy and stronger support for Nigeria's growth ambitions, the regulator added.

Fiacre E. Kakpo