As the Nigerian stock market enters the second quarter (Q2) of 2025, analysts and investors are assessing key economic factors that could drive market performance.
Industry experts indicate that while corporate recovery and banking sector growth provide a favorable backdrop, investors are seeking fresh catalysts to sustain momentum and spur renewed interest in equities.
However, some experts in an exclusive chat with THE WHISTLER warn that without strong corporate earnings or high dividend yields, market performance could remain flat amid high interest rates and weak disposable income.
They noted that investors are closely monitoring macroeconomic trends, banking sector profitability, and corporate announcements to determine the market’s trajectory.
Head of Research and Investment at FSL Securities Limited, Mr. Victor Chiazor, highlighted critical market conditions that could influence performance in the coming months.
He pointed to rising interest rates, weak disposable income, and the large volume of shares in circulation from last year’s capital raises as potential challenges.
“Given the high number of shares in issue for companies that raised equity capital last year, a high interest rate environment, and weak disposable income, investors will be looking for a new trigger that will spur renewed interest in the market,” Chiazor explained.
In 2024, many Nigerian banks posted record-breaking profits, largely driven by foreign exchange (FX) revaluation gains.
However, Chiazor noted that such gains are unlikely to be repeated in 2025, meaning financial institutions will need to explore alternative revenue streams to maintain strong earnings.
“With a very low possibility for banks to report significant FX revaluation gains, which bolstered their performance in the last financial year, investors will be looking for other incentives,” he added.
Despite this, analysts remain optimistic about the banking sector’s recapitalization efforts, which are progressing swiftly and attracting strong investor participation.
The continued growth of the oil industry, Nigeria’s largest revenue-generating sector, is also expected to provide a favorable economic environment.
With fewer opportunities for FX windfalls, Chiazor emphasized that investors will turn their focus to corporate earnings and dividend payouts.
He noted that dividend yields of around 15 per cent could attract significant interest, helping to drive market activity. However, if no major earnings surprises or strong dividend announcements materialize, market performance in Q2 2025 could remain relatively flat.
“If we fail to see any major trigger, the market performance in Q2 2025 is likely to be relatively flat,” he cautioned.
According to Managing Director of Highcap Securities Limited, Mr. David Adonri, the gradual stabilization of major enterprises following the financial impact of the Naira’s flotation is fostering a more favorable market outlook.
Many companies, particularly those previously burdened by foreign exchange losses and economic volatility, are beginning to rebuild their balance sheets, setting the stage for potential growth in equities.
“The market is entering Q2 with hope and optimism as major enterprises have started recovering from the damage inflicted on their balance sheets due to the floating of the Naira,” Adonri stated.
He noted that the banking sector, a key driver of the Nigerian economy, is also poised for significant growth.
Adonri projected that financial institutions will post record-breaking profits in the second quarter, propelled by foreign exchange revaluation gains, increased interest income, and enhanced efficiency measures.
“The anticipated surge in profitability could further boost investor confidence and drive-up equity valuations across the market.
“Market participants are closely monitoring macroeconomic trends and corporate earnings reports to assess the trajectory of the Nigerian Exchange (NGX) in the coming months.
If the positive momentum continues, Q2 2025 could mark a period of substantial gains for investors and further strengthen Nigeria’s capital market resilience,” he said.
Managing Director and Chief Executive Officer of Arthur Steven Asset Management, Mr. Olatunde Amolegbe projected a positive outlook for the Nigerian Exchange (NGX) All-Share Index, citing key fundamental factors driving investor confidence.
“I anticipate a stable market or further price increases in Q2,” Amolegbe stated, emphasizing that the market is well-positioned to sustain its momentum following recent economic developments.
One of the primary factors supporting this outlook is the ongoing recapitalization in the banking sector, which has progressed rapidly in response to regulatory requirements.
Amolegbe highlighted the swift pace of this process, pointing to the recent release of allotment results as evidence of strong institutional and investor participation.
“The banking recapitalization process is progressing swiftly, as evidenced by the recent release of allotment results,” he noted.
Additionally, he noted that increased production in the oil industry has further strengthened economic fundamentals, providing a favorable backdrop for the equities market.
As Nigeria’s largest revenue-generating sector, he said higher oil output is expected to boost foreign exchange reserves and enhance investor sentiment.
Amolegbe also pointed to the growing investor interest in public offerings as another indication of market strength. The heightened demand for equities suggests that investors remain confident in the market’s long-term prospects despite previous economic uncertainties.
“Public offerings have attracted strong investor engagement,” he observed, signaling increased liquidity and market participation.
Looking ahead, Amolegbe hinted that upcoming corporate announcements in Q2 2025 could serve as additional catalysts for market movement.
“We may witness favorable corporate news that could positively impact investor sentiment,” he added.
As Q2 unfolds, market participants will be closely watching macroeconomic policies, corporate earnings reports, and global financial trends to determine the direction of the Nigerian Exchange (NGX).
While optimism remains, the absence of clear growth triggers could result in a cautious market environment.
Investors will be particularly focused on corporate announcements, banking profitability, and the impact of monetary policies on liquidity.
Should favorable conditions align, Q2 2025 could present new opportunities for market growth and investor confidence.
THE WHISTLER reported recently that the Nigerian Exchange Limited (NGX) concluded the first quarter of 2025 on a strong note, with the All-Share Index (ASI) recording a year-to-date (YTD) return of 2.7 per cent.
This performance highlights the resilience of Nigeria’s equities market, despite ongoing economic challenges and global financial uncertainties.
As of the market close on March 28, 2025, the ASI stood at 105,660.64 points, marking an increase from the 102,926.40 points recorded at the beginning of the year.
This upward trajectory reflects renewed investor confidence, strategic corporate actions, and supportive government policies that have collectively strengthened market sentiment.
Analysts attribute the market’s performance to various factors, including increased foreign portfolio investments, improved corporate earnings reports, and key economic reforms introduced by the government. The financial and consumer goods sectors played a pivotal role in driving the index upward, with major listed companies reporting impressive results that fueled investor optimism.
Additionally, policy measures aimed at enhancing liquidity, stabilizing the exchange rate, and fostering a business-friendly environment contributed to the positive outlook for the equities market. Regulatory interventions by the Securities and Exchange Commission (SEC) and the Central Bank of Nigeria (CBN) also helped to instill confidence among investors.
Despite macroeconomic headwinds, the NGX continues to demonstrate its potential as a viable investment destination. Market experts remain cautiously optimistic about the coming quarters, anticipating further gains if the prevailing positive sentiment is sustained and external economic pressures are effectively managed.
With a solid start to the year, the Nigerian equities market remains positioned for potential growth, reinforcing its role as a critical driver of economic development and wealth creation in the country.
