Financial analysts are projecting a resurgence in both foreign and domestic investments in Nigeria’s capital market, driven by recent government policy reforms and improved investor sentiment. The analysts believe that a stable economic environment will encourage stronger participation from both local and foreign investors. However, they caution that challenges such as inflation, interest rates, and foreign exchange volatility must be addressed to ensure sustained growth.
Bisi Bakare, the National Coordinator of the Pragmatic Shareholders Association of Nigeria, highlighted that the perceived decline in market transactions is merely a temporary adjustment in investor behaviour. “Contrary to claims of falling transactions, we are witnessing a strategic shift in the market as investors adapt to emerging opportunities. Recent government initiatives, including the recapitalisation of banks, have started to stimulate market activities, and this trend is expected to gain momentum,” she said.
Recent data from the Nigerian Exchange Limited revealed that the Nigerian stock market recorded a total domestic transaction value of N2.5 trillion in the first half of the year, underscoring the increasing dominance of local investors over their foreign counterparts. This shift marks a significant change in the dynamics of the Nigerian capital market.
Bakare also pointed out that the capital market has seen increased participation thanks to policies aimed at fostering economic stability and creating a more favourable business environment. However, she noted that with inflation and currency volatility posing significant challenges, the government’s focus on stabilising foreign exchange and lowering interest rates is crucial for market growth.
“Macroeconomic factors such as inflation and exchange rate stability are essential for economic survival. Rising inflation and FX instability increase operational costs and reduce profitability, which in turn discourages borrowing and investment,” she explained. Bakare advised investors to tread cautiously in the primary market, particularly as bank recapitalisation presents opportunities for attractive dividends.
Echoing this positive sentiment, financial analyst Rotimi Fakeyejo warned that the resurgence of capital inflows could be short-lived if key economic challenges remain unaddressed. He emphasised that while there are opportunities in the market, global economic conditions and persistent foreign exchange volatility continue to pose risks for foreign investors.
“Although there is optimism surrounding government reforms, the insecurity in the country and unpredictable foreign exchange rates still cast a shadow over investor confidence. Foreign investors remain cautious as they assess the stability of the naira and the overall risk environment before making long-term commitments,” Fakeyejo noted.
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He also highlighted that rising inflation and high interest rates are limiting the growth potential in both the primary and secondary markets. “The high cost of borrowing and raw material imports are squeezing company margins, which may deter local investors from fully participating in the market,” he added. Despite these concerns, Fakeyejo believes that investors can still capitalise on opportunities in the primary market, particularly with ongoing bank recapitalisation efforts.
