Snapshot

Nigeria’s equity paradox is no longer debatable. In 2025, the Nigerian Exchange delivered one of the strongest equity performances globally, with the All-Share Index rising by roughly 51 percent and total market capitalisation approaching ₦100 trillion. By any return-based framework, Nigeria should have attracted meaningful foreign inflows. Instead, global and emerging market portfolios remained structurally underweight. According to the Argon-Africa Economic and Market Intelligence Unit, this disconnect is not a confidence failure or a macro mispricing, it is a tradability failure embedded in market structure.

The binding constraint lies in extreme free-float compression at the top of the exchange. While Nigeria ranks among Africa’s largest equity markets by headline capitalisation, a substantial share of that value is functionally inaccessible to institutional capital. The top ten listed companies account for more than 60 percent of total market value, yet their average free float is barely above 25 percent. Among the largest industrial and consumer names, effective floats fall into single digits. In practical terms, tens of trillions of Naira in quoted equity behave less like public markets and more like partially accessible private assets.

This distinction matters because liquidity and tradability are not the same. Liquidity refers to turnover; tradability refers to the ability to enter, size, hedge, and exit positions without materially distorting prices. Argon-Africa’s market micro-structure review finds that Nigeria’s failure point is not the absence of trading, but the inability to absorb institutional-scale orders without destabilising price discovery. For a $1 billion frontier or emerging market fund, a modest 30–50 basis point allocation implies deploying $3–5 million. In many Nigerian large-cap stocks outside tier-one banks, this represents multiple days or even weeks of average trading volume. Even partial execution risks pushing prices on entry, signaling positions to the market, and creating asymmetric exit risk during volatility or rebalancing. For funds governed by best-execution rules and daily NAV discipline, this is a binding constraint.

Peer comparisons reinforce the diagnosis. Morocco attracts sustained foreign participation despite lower growth because its large-cap companies typically maintain free floats of 40–60 percent, supported by domestic pension and insurance pools. Egypt remains investable despite FX volatility because leading stocks offer deeper order books and higher effective floats. Kenya, though smaller than Nigeria, often captures a disproportionate share of frontier allocations due to superior tradability in core names. South Africa dominates Africa-focused EM portfolios because of deep float, active market-making, and exit optionality. Nigeria stands apart: large in theory, narrow in practice.

This structure explains why valuation arguments consistently fail to unlock inflows. Nigerian equities are not cheap because earnings are doubted; they are cheap because liquidity is impaired. Valuation discounts compensate for price impact, exit risk, and founder control, not macro uncertainty. In effect, listed equities trade closer to illiquid private assets than fully investable public securities. Strong returns can coexist with capital exclusion.

The dynamic is self-reinforcing and mechanical. Low free float leads to high price impact. High price impact deters institutional participation. Institutional absence leaves liquidity retail-dominated. Retail-dominated markets exert no pressure for dilution. The cycle repeats. This is not sentiment, it is market physics.

The implication is unambiguous. Nigeria’s underweighting in global indices and institutional portfolios is rational, not biased. FX reform, macro stabilisation, and earnings growth are necessary but insufficient. Until free float expands meaningfully through regulation, fiscal incentives, or founder-led dilution, foreign capital will continue to engage Nigeria tactically rather than strategically. Nigeria does not suffer from a return problem. It suffers from a tradability problem: and until that is addressed, performance alone will not change its place in global portfolios.