Nigeria’s banking sector drives Q2 market stabilisation amid recapitalisation surge

Cordros Securities expects Nigeria’s equities market to settle into a more measured rhythm in the second quarter after an aggressive run-up in the opening months of 2026, with bank stocks remaining the focal point for investors. According to the brokerage, the exceptional gains posted in the first quarter are likely to give way to selective buying as market participants become more discerning, though corporate fundamentals should continue to underpin valuations.

The end-March surge on the Nigerian Exchange provided the backdrop for Cordros’ view. Market data showed the NGX All-Share Index moved past the 200,000-point threshold for the first time and total market capitalisation rose to roughly N129.2 trillion. The banking sub-index was a major contributor to that advance, rising by about 22.8 percent year to date in the first quarter, underlining how lenders have driven sentiment.

A central catalyst for renewed interest in lenders has been the Central Bank of Nigeria’s recapitalisation programme. Bloomberg reported in March that 30 banks had already met the revised capital threshold before the deadline, and Nigerian media, citing the central bank, said on April 2 that 33 of 37 banks had met the target and that N4.65 trillion had been raised in fresh equity. The CBN has also publicly reassured depositors that the exercise will not endanger customer funds, emphasising the stability of the financial system.

Individual bank results illustrate the pace of capital mobilisation. According to reporting by The Sun, Signature Bank increased its paid-up capital to N52 billion, exceeding the N50 billion minimum for regional commercial banks. The Cable reported SunTrust Bank has also cleared the N50 billion benchmark after a private placement that lifted its paid-up capital to about N51.1 billion. Earlier coverage cited by NigeriaHousingMarket noted that 20 deposit money banks had together raised about N4.05 trillion ahead of the March 31 compliance deadline.

Analysts say the recapitalisation has changed how market participants price banking equities. Stronger capital buffers improve perceived resilience and could support dividends and lending capacity over time, but consolidation pressures are intensifying for smaller lenders that struggle to meet the higher thresholds. A Reuters piece in January framed the tougher rules as part of broader securities-industry reforms aimed at bolstering stability and protecting investors, with mergers and restructuring flagged as likely outcomes.

Macro forces add both support and risk. Reuters reported that Nigeria’s capital inflows rose sharply in 2025 to $23.22 billion, with foreign portfolio investors drawn by attractive returns; equities attracted about $2.10 billion of that total and the banking sector secured the largest share. That external demand has propped up prices but leaves the market exposed to reversals if global risk appetite shifts or domestic policy credibility falters.

Cordros’ forecast of a “calmer but constructive” quarter therefore reflects a balancing act, earnings expectations, stronger bank balance sheets and clearer regulatory direction provide a positive narrative, while elevated valuations and flow sensitivity raise the prospect of profit-taking and rotation. The brokerage also expects leadership to shift across sectors at different times depending on corporate earnings, dividend declarations and policy signals, with consumer names, industrials and other financial stocks seen as potential beneficiaries of tactical flows.

Investors will be watching forthcoming earnings seasons and any further official commentary on recapitalisation and sector oversight for cues on sustainability. For now, market participants appear to favour lenders that demonstrate the capital strength to navigate the new regulatory regime, while remaining alert to broader market vulnerabilities driven by global and domestic uncertainties.