Nigerian stocks still offer strong value despite market correction, says expert

THE recent correction in the Nigerian equities market has created attractive buying opportunities for long-term investors, although uncertainty surrounding the Nigerian Exchange’s (NGX) transition to a T+1 settlement cycle continues to weigh on investor sentiment, according to Co-Managing Partner at Aztran Limited, Mr Efosa Aluyi,

Speaking in an interview with Arise News on Thursday, Aluyi said many Nigerian stocks are now trading at attractive valuations following the recent sell-off, but stressed that resolving concerns over the new settlement regime is critical to restoring market confidence.

“From a value perspective, there is still great value in the market. Some of these stocks are beginning to look quite cheap, but the policy issue needs to be resolved,” he said.

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Aluyi advised investors with a long-term investment horizon to remain calm despite recent market volatility, noting that the current decline presents opportunities rather than reasons for panic.

“If you have long-term money, there is absolutely no reason to panic because there is still significant value within the market,” he added.

He attributed the market’s recent weakness largely to uncertainty over the NGX’s migration from the T+3 to the T+1 settlement cycle. According to him, while the policy is intended to improve market efficiency through faster trade settlement and reduced counterparty risk, it has created operational and funding challenges, particularly for foreign portfolio investors.

“The entire month of June was quite bearish. Since the policy was introduced on June 1, the market has lost nearly 15 percent, pushing us into correction territory,” Aluyi said.

He explained that the shorter settlement timeline poses challenges for investors operating across multiple jurisdictions and time zones, making it more difficult to manage funding and settlement obligations.

“T+1 looks good on paper because trades settle faster and counterparty risk is reduced, but it creates operational and funding challenges, especially for foreign investors dealing with different time zones,” he said.

Commenting on concerns raised by FTSE Russell over Nigeria’s market classification, Aluyi said the country must continue strengthening its foreign exchange (FX) market while improving trading infrastructure to support the new settlement framework.

“Markets that have implemented T+1 have impeccable operational systems. Nigeria has improved on the FX side, but the market still needs stronger infrastructure and funding solutions,” he noted.

Aluyi said uncertainty over Nigeria’s prospects for inclusion in global equity indices has also prompted foreign investors to reduce their exposure to Nigerian equities, while domestic investors remain cautious pending greater policy clarity.

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“Foreign investors are reducing their exposure because the expected catalyst of index inclusion is now uncertain. Local investors are also waiting to see how the T+1 situation is resolved,” he said.

Looking ahead, he identified policy clarity as the most important factor that will shape market performance in the second half (H2) of the year, alongside corporate earnings and global macroeconomic conditions.

“It is a cocktail of factors, but the pendulum swings more on the side of policy. Once the settlement issue is resolved, earnings and other fundamentals will support sentiment,” he said.

Aluyi also expressed optimism about the industrial goods, banking and oil and gas sectors, citing strong corporate earnings, infrastructure spending, banking recapitalisation and ongoing energy sector reforms as key drivers of growth.

Despite the recent correction, he maintained that the Nigerian stock market remains fundamentally resilient and continues to offer attractive long-term investment opportunities once concerns surrounding the T+1 settlement policy are addressed.