NGX to Create Wealth in 2026, Traded in Overbought Region—Report
The Nigerian Exchange (NGX) is anticipated to create more wealth in 2026 on the back of an improved macroeconomic indicators and attractive valuation. With about N100 trillion in equities market capitalisation, the Nigerian market traded in overbought region all through year 2025.
Top performing companies doubled down on Nigerian Exchange (NGX) year to date gain. The local bourse created wealth for risk takers in 2025 with some companies recording 100% price appreciation of 12 months.
Settling at 51.20% gain, the local bourse wrapped up the last trading session of the year, All-share index closed at 155,613.03 points in 2025, highest level attained since 2020.
The momentum in the equities market was strong, and it lasted all though the year with intermittent gallops resulting from sell side actors profit-taking transactions.
Market sentiment was bolstered by Nigeria’s macroeconomic recovery, while the local bourse acted as hedge against the country’s double digit headline inflation rate.
In its commentary note, Meristem Securities Limited stated that the market price to earnings ratio has proven empirically to be a good indicator for assessing market valuation, as it directly links the market price to a key driver of value for companies’ earnings.
The market index trades at a price to earnings ratio of 6.92x, which was below its five year average of 10.65x, and ten-year average of 11.30x. It also trades at a discount compared to the MSCI frontier, emerging and developed market averages of 11.50x, 16.80x and 24.80x, Meristem Securities said.
Comparing to other sub-Saharan Africa (SSA) peers, Ghana settled at 7.86x, Egypt: 8.47x, South Africa: 16.28x, Singapore: 14.00x, India: 24.30x, Malaysia: 24.30x.
The NGXASI closed up in 2025 by 51.19% but the price earnings multiple contracted by 32.49% to 6.92x in 2025 versus 10.25x in 2024.
Meristem Securities Limited said this indicates that the gain was mostly driven by the buoyant earnings performance of companies in the broad index.
“Using technical momentum indication based on the 30- day Relative Strength Index (RSI) level of 67.42x, it is instructive to note that technical indicators show that the market is overbought. The market however traded in this overbought region all through the 2025 trading year.
“Given our expectations of strong earnings performance across sectors in 2026, returns are likely to be increasingly driven by earnings growth, as such the index P/E ratio is expected to moderate further.
“Our outlook on the local bourse remains positive, as we foresee further gains for the NGX-ASI in 2026. This view is based on our assessment of key themes that we expect to shape investors’ sentiment”, the investment firm explained.
Analysts at the firm said they witnessed strong earnings recovery across key sectors in 2025, driven by the improving macroeconomic backdrop. For context, the NGX-ASI 9M:2025 earnings per share (EPS) grew by +94.75% year on year, beating Meristem Securities forecast of 56.50%.
The firm said the strong pricing power, cost control and operational efficiency across sectors buoyed the resilient earnings performance. Analysts expect a further rebound in the Consumer goods and Industrial goods sectors as demand improves on the back of real consumer income growth.
“Also, the financial services sector is set to benefit from larger capital buffers, interest income, and reform-driven underwriting performance for insurers, despite slowing FX gains.
“In the same vein, the Oil & Gas sector is projected to grow modestly in 2026, bolstered by a more resilient upstream segment, although downstream operators may continue to face challenges such as competitive pressures and tightening margins.
“Furthermore, stronger earnings may trigger higher dividend payouts across listed companies, although stronger stock price appreciation may taper dividend yields.
“For real sector tickers that halted dividend payment in previous years due to eroded earnings, we expect a broad return to dividend distribution in 2026”.
The firm said several sectors remain attractively valued relative to their historical averages. This creates an attractive opportunity for investors as we move into 2026.
Banking, industrial goods, telecommunications and consumer sectors, in particular, are positioned to benefit from strong earnings momentum, supportive macroeconomic conditions, and resilient demand dynamics.
Meristem Securities Limited said these valuation gaps, coupled with strong corporate fundamentals, suggest that sector-level performance could drive market gains in 2026.
The supportive macro backdrop in 2025 boded well for the equities market, Meristem Securities Limited said in a report, adding that it expects this to persist in 2026.
The firm said further disinflation and a stronger currency are poised to improve investors’ sentiment, as cost pressures taper for corporates, which is expected to strengthen earnings margins across sectors.
These, coupled with lower policy rates, would imply higher valuations for equity assets and bolster investors’ risk-on bias. The investment firm expects investor sentiment to be impacted by key reforms during the year.
Meristem Securities said the implementation of the Capital Gains Tax (CGT) could influence investors’ strategies in 2026, adding that it observed increased equity assets exposure by Pension Fund Administrators (PFAs) in 2025 and expects this to persist alongside improving retail investor activity as macro fundamentals become more stable. GTCO Slides to £1,754.85m in London Stock Exchange
