Nigeria’s stock market has added N57.14tn in value this year, lifting market capitalisation from N99.38tn at the end of 2025 to about N156.52tn by August 17. The NGX All-Share Index is up 57.5 percent. But the headline gain conceals a more important feature of the market. Just 24 companies account for 74.8 percent of total NGX equities market capitalisation, representing about N117tn.
That concentration means the market’s overall performance is being shaped disproportionately by a relatively small group of large companies. For investors, the implication is not that smaller stocks should be ignored, but that the index provides an incomplete picture of portfolio performance.
The investment question is valuation
Large companies dominate the NGX for understandable reasons. Businesses such as MTN Nigeria, Airtel Africa, Dangote Cement, BUA Foods, BUA Cement, Seplat Energy and the major banks have scale, established operations and the ability to attract substantial institutional capital. But market dominance does not make a stock automatically attractive.
A good company can be a bad investment if its share price already discounts too much of its future growth. After a 57.5 percent market advance, that distinction becomes particularly important. Investors need to examine whether earnings and cash generation are growing sufficiently to support higher valuations.
Revenue growth, margins, operating cash flow, leverage, return on equity and dividend capacity are therefore more useful investment indicators than recent share-price performance alone. The question is not simply which stocks have risen most. It is whether the expected future return still compensates investors for the price and risk.
Liquidity is an investment variable
Market concentration also reveals where liquidity is deepest. Large-cap stocks generally attract more trading activity, making it easier for investors to build or reduce positions. Smaller companies can offer attractive valuations but may carry a different risk: the inability to exit efficiently when sentiment turns.
That makes liquidity part of portfolio construction rather than merely a trading consideration. An investor considering a less-liquid stock should assess not only its potential return but also the size of the position relative to normal trading activity and the likelihood of finding buyers during a market sell-off. A quoted price is not necessarily the same as a price at which a large position can be realised.
Dangote could change the market’s centre of gravity
A potential listing of Dangote Petroleum Refinery could further alter the structure of the NGX. However, investors should distinguish between market expectations and regulatory facts. The Securities and Exchange Commission stated in June 2026 that no application for an IPO or public offer of shares in the refinery had been filed with or approved by the Commission at that time.
Any eventual transaction should therefore be assessed only after the company and its advisers make formal disclosures and the relevant regulatory approvals are obtained.
If a large public offering eventually proceeds, its effect could extend beyond the refinery itself. A company of significant scale could materially alter market capitalisation, index composition, institutional allocations and trading liquidity. But size will not determine whether the shares are attractive.
The investment case will ultimately come down to the price investors pay for the company’s future cash flows. For an energy business, that means understanding production capacity, crude supply, operating costs, margins, capital expenditure, financing requirements and the sustainability of earnings.
What investors should do
The concentration of the NGX argues for selectivity rather than indiscriminate buying. Investors should first understand the earnings engine of each company they own and then compare the share price with a reasonable assessment of future earnings and cash flows.
They should also diversify by economic exposure, not simply by the number of stocks. Five banks may look like five holdings but remain heavily exposed to the same credit, interest-rate and regulatory cycle. The same principle applies to companies exposed to the same commodity, exchange-rate movement or consumer trend.
The strongest portfolio is not necessarily the one containing the most companies. It is one in which the major risks are understood, valuations are defensible and individual positions can be managed without excessive liquidity risk.
The bigger picture
Nigeria’s equity market is becoming larger, but its growth remains highly concentrated. That concentration has two sides. It means investors in the dominant companies can capture a substantial share of the market’s gains. It also means a correction in a few heavyweight stocks can have an outsized effect on the index.
The potential arrival of another very large company could deepen that dynamic while simultaneously making the exchange more valuable and liquid. For investors, the lesson is not to chase the market’s biggest names or to hunt blindly for neglected small companies. It is to look beyond the index, separate business quality from valuation, and price liquidity and concentration risk into every investment decision.
The NGX may contain more than 150 listed companies, but nearly three-quarters of its value sits in just 24. That is the market investors are actually navigating. The opportunity lies not simply in finding the biggest companies, but in identifying where future earnings still justify today’s prices.
Abayomi Fashina, BSc., MSc., AAT, ACA, is the Lead, Enterprise Risk Management at STL Trustees Limited.
