By Dave Adekunle
An economic commentary questioning the performance of Nigeria’s stock market has prompted debate over whether the rally reflects genuine economic gains or merely the effect of naira depreciation.
The essay, titled “Tinubu’s Fake Economic Theory and the Stock Market: Why His Booming Economic Claim Is Delusion of Grandeur,” argues that the market’s rise is largely an optical illusion.
It contends that a major naira devaluation automatically inflates the local-currency value of dollar-linked assets, creating paper wealth without necessarily producing jobs, factories or higher household incomes.
The argument, however, can be tested by examining the performance of Nigerian equities in dollar terms, rather than solely in naira.
On July 10, 2026, the Nigerian Exchange All-Share Index reportedly became the world’s best-performing equity index in dollar terms, gaining about 67 per cent year-to-date.
By Aug. 14, Nigeria ranked third among 92 benchmark markets tracked in dollar terms, with a gain of 65.23 per cent.
South Korea’s KOSPI led with 68.52 per cent, while Ghana’s GSE Composite ranked second with 66.68 per cent.
A dollar return measures investment performance after accounting for exchange-rate movements, meaning naira depreciation cannot by itself explain a strong dollar-denominated return.
The naira has also appreciated against the dollar in 2026, following an appreciation of about 5.9 per cent in 2025, according to the analysis.
This raises an important question: if the stock market rally is purely the result of naira depreciation, where is the corresponding depreciation?
Another argument against the rally is that it is being driven mainly by speculative foreign portfolio capital.
Available market participation figures, however, indicate that domestic investors accounted for about 89 per cent of participation and transaction value on the Nigerian Exchange in the first half of 2026.
Foreign investors accounted for about 11 per cent, suggesting that the current rally is predominantly domestically driven.
About 500,000 new investors also reportedly entered the market through public offers and rights issues between 2024 and 2026.
The increase suggests a broader participation base rather than a market controlled exclusively by asset managers and foreign speculative investors.
The analysis further argues that the stock market should not be assessed only through secondary-market trading.
Over 24 months, Nigeria’s capital market reportedly mobilised ₦4.65 trillion in fresh equity, helping 33 deposit money banks meet new Central Bank of Nigeria recapitalisation requirements.
Such capital represents permanent, loss-absorbing funds on bank balance sheets, rather than money merely changing hands among stock-market speculators.
Better-capitalised banks can also accommodate larger lending exposures, potentially increasing financing available to manufacturing, agriculture, infrastructure and power projects.
The banking sector’s market performance also reflected investors’ assessment of recapitalisation risks.
The banking index declined during the period when investors anticipated dilution from rights issues, before recovering as banks raised capital and investors reassessed their stronger balance sheets.
The pattern, the analysis argues, demonstrates price discovery rather than manipulation.
Foreign capital flows have also strengthened, with inflows into the banking sector reportedly rising 93.25 per cent year-on-year to $13.53 billion in 2025.
The figure represented about 58.26 per cent of Nigeria’s total foreign capital importation of $23.22 billion during the year.
International investors reportedly supplied more than one-quarter of the capital raised during the banking recapitalisation exercise.
The analysis also cites regulatory and market reforms, including the Investments and Securities Act 2025, which replaced the 2007 legislation.
The new framework strengthened enforcement, criminalised Ponzi schemes and brought digital assets within the regulatory perimeter.
The move towards T+1 settlement and Nigeria’s inclusion on the S&P Dow Jones Indices 2027 watchlist were also cited as signs of improving market infrastructure.
However, the analysis acknowledges continuing concerns over Nigeria’s investment environment.
FTSE Russell remains cautious about Nigeria’s market reclassification, particularly over the reliability of capital repatriation and accessibility for international investors.
The criticism that the stock market alone cannot improve living standards is also valid, the analysis acknowledges.
A rising All-Share Index does not automatically create jobs, reduce food prices, improve electricity supply or make transportation and housing more affordable.
Market capitalisation is therefore not synonymous with household welfare or broad-based economic prosperity.
Nigeria also needs stronger greenfield investment, deeper manufacturing and technology representation on the exchange, improved infrastructure and cheaper credit for businesses.
The economy remains heavily weighted towards financial services, making diversification of listed companies important for genuine market depth.
However, dismissing the stock market rally entirely as a currency illusion risks overlooking the capital it has mobilised and the increasing participation of domestic investors.
The stock market, therefore, should be treated as an economic barometer rather than the economy itself.
Its performance provides useful information about investor expectations, liquidity and corporate prospects, but it cannot substitute for improvements in production, employment, infrastructure and household welfare.
The central issue is consequently not whether Nigeria’s stock market is booming, but what is driving the boom and whether the gains can translate into sustainable economic value.
A market that has mobilised trillions of naira in new equity and attracted wider domestic participation cannot simply be dismissed as an optical illusion.
At the same time, the rally should not be presented as proof that Nigeria’s broader economic challenges have been solved.
The appropriate test is whether capital mobilisation ultimately strengthens businesses, expands productive investment, creates jobs and improves living standards.
Dave Adekunle is a capital markets analyst and commentator on financial regulation.
