A sustained rally in equities is prompting caution among market intermediaries, with brokers warning that investor exuberance may be running ahead of underlying economic fundamentals. The benchmark index on the Nigerian Exchange Limited has extended its upward trajectory in recent weeks, supported by firmer macroeconomic sentiment and increased domestic participation. However, the Association of Securities Dealing Houses of Nigeria (ASHON) has flagged speculative pockets that could threaten the durability of the gains.
In a statement, ASHON acknowledged that the rally reflects growing investor confidence, supported by policy reforms and significant engagements across asset classes. It warned that some stocks have recorded sharp price appreciations without commensurate improvements in earnings, governance standards or balance-sheet strength.
Market participants say the divergence between price momentum and company fundamentals has become increasingly visible in selected counters, raising concerns about overvaluation and thin free floats. Such conditions, analysts argue, heighten vulnerability to abrupt corrections, particularly in a market where liquidity can be uneven.
ASHON pointed to the recent suspension of Zichis Agro-Allied Limited by the exchange over irregular trading patterns as evidence that vigilance remains essential. The move, it said, demonstrated the exchange’s commitment to orderly market conduct and reinforced the importance of surveillance mechanisms during periods of heightened activity.
The association’s intervention reflects lingering memories of the 2008–2009 market crash, when speculative excess and weak risk controls amplified systemic stress. While today’s macroeconomic context differs, with ongoing monetary tightening and structural reforms aimed at stabilising the naira, brokers are wary of sentiment-driven bubbles forming in isolated segments of the market.
ASHON urged regulators, including the exchange’s regulatory arm, RegCo, to intensify monitoring and enforce compliance with listing and disclosure rules. It also called on quoted companies to adhere strictly to free float requirements, arguing that broader share distribution would improve price discovery and reduce volatility caused by concentrated holdings.
Beyond surveillance, the association advocated renewed efforts to deepen the market through fresh listings and product innovation. Expanding the issuer base, it said, would enhance liquidity, diversify risk and create more investment channels for both institutional and retail participants.
Balancing renewed investor optimism with regulatory discipline has become the central test for the capital market. After a prolonged period of muted activity, the current rally has restored momentum to equities. Yet, as cautioned by ASHON, durable expansion will hinge less on index performance and more on whether valuations reflect earnings strength, sound governance and transparent disclosures. For a market intent on attracting stable domestic and foreign capital, institutional credibility remains the defining currency.
