Nigeria’s banking sector is more and more being positioned by market analysts as probably the most compelling funding alternative within the fairness market in 2026, in keeping with most analysts’ views sampled by Nairametrics.
The analysts led by Mr. Tajudeen Olayinka, cited stronger capital buffers, macroeconomic stabilisation and expectations of regulatory readability from the Central Bank of Nigeria (CBN) as potential drivers.
Nonetheless, lingering uncertainty round recapitalisation outcomes, dividend sustainability and proposed tax reforms continues to mood investor enthusiasm.
What the stockbrokers are saying
Main the robust optimism about banking shares in 2026, Olayinka, the Chief Govt Officer of Wyoming Capital & Companions Restricted, mentioned the continuing recapitalisation train has basically strengthened banks’ steadiness sheets, enhancing their capability to develop credit score and mobilise deposits throughout the financial system.
He mentioned the capital injections, although dilutive within the brief time period, have repositioned banks for long-term development as financial circumstances enhance. “The enterprise of a bank is asset creation and legal responsibility technology, and the financial system is now in a greater place to assist that,” Olayinka mentioned, noting that Nigeria has moved previous the worst of the post-reform financial dislocation skilled in 2023.
Olayinka and his skilled colleagues argued that fears over share dilution are overstated, declaring that some banks that accomplished capital elevating early have been nonetheless capable of pay dividends on newly issued shares at ranges larger than earlier years.
He defined that the size of fairness issuance was largely a consequence of the CBN’s recapitalisation framework, which recognises solely paid-up capital and share premium—excluding reserves—thereby forcing even basically robust banks to lift fairness at depressed market valuations.
Consequently, many banking shares are actually buying and selling at deep reductions to ebook worth, creating what he described as a uncommon mispricing alternative.
Wait-and-see temper dominates as traders eye dividends, CBN sign
Regardless of this optimism, different market operators urge warning. Mallam Garba Kurfi, Chief Govt Officer of APT Securities & Funds Ltd, mentioned traders stay firmly in “wait-and-see” mode following the discharge of banks’ administration accounts.
He famous that weak interim dividend payouts—notably decrease than prior-year ranges—have heightened scepticism, particularly in opposition to the backdrop of recapitalisation uncertainty and up to date regulatory actions in opposition to establishments resembling Aso Financial savings & Loans and Union Properties.
Kurfi pressured that till the CBN formally broadcasts which banks have totally met recapitalisation necessities, claims by particular person lenders stay speculative.
“That announcement will decide the course of banking shares,” he mentioned.
He additionally highlighted a structural constraint limiting upside potential: the sheer measurement of banks’ excellent shares, typically between 40 billion and 50 billion items, which makes sharp worth appreciation unlikely compared with firms like Seplat Vitality or Nestlé Nigeria, whose smaller share bases assist larger nominal costs.
Consequently, Kurfi believes banking shares will want robust dividend payouts to justify present valuations. Any regulatory restrictions on dividends may cap costs or set off pullbacks, particularly as some traders—having recorded beneficial properties of over 100% in sure names—might decide to take revenue.
Whereas he acknowledged selective alternatives in low-priced shares resembling Jaiz Bank, which has gained about 40–50 per cent since January, he doesn’t anticipate broad-based rallies with out clearer regulatory and earnings indicators.
Tax coverage emerges as a brand new danger to fairness upside
Past sector-specific points, analysts warn that broader coverage dangers may affect how a lot upside banking shares—and the fairness market extra broadly—can ship in 2026. Dr. Muda Yusuf, Convener of the Centre for the Promotion of Public Enterprise (CPPE), has cautioned that the proposed improve in capital beneficial properties tax from 10% to 30% may considerably dampen investor confidence, significantly amongst massive institutional traders who dominate fairness market liquidity.
Whereas Yusuf acknowledged that Nigeria’s development outlook stays optimistic and that rates of interest may average in 2026—making equities extra engaging relative to fastened revenue—he warned that sharply larger taxes may undermine market momentum simply as confidence is rebuilding.
“Slamming institutional traders with such a pointy tax improve is a significant concern,” he mentioned, noting that the total influence would solely turn into clear as soon as implementation begins.
Taken collectively, analysts agree that Nigeria’s banking sector stands at a vital inflection level. Stronger capital positions and macroeconomic stabilisation have laid the groundwork for potential repricing, positioning banks as a lagging however high-upside section of the fairness market.
But, the tempo and scale of beneficial properties in 2026 will in the end rely on three decisive components: regulatory readability from the CBN, dividend outcomes for the 2025 monetary 12 months, and the coverage surroundings—significantly taxation—that shapes investor urge for food throughout the broader market.
Backstory
Nigerian banking shares posted subdued returns in 2025. The CBN ended pandemic-era forbearance measures, compelling banks to recognise beforehand deferred impairments and tighten provisioning.
This has led to larger provisioning seen in earnings releases, placing a drag on the underside line of most banks. Decrease-than-expected dividend payouts additionally contributed to investor sentiment in the direction of the sector, basically resulting in the sector underperforming the broader index in 2025.
The continued recapitalisation drive, with compliance due by March 2026, led to a sequence of capital market actions starting from proper points to public presents.
We imagine the sector is nicely positioned to turn into a significant driver of development in 2026 as macroeconomic stability progressively returns, mentioned analysts at Coronation Merchant Bank.
Be First to Comment