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The Nigerian Exchange (NGX) has been advised to maintain a careful distance from partisan politics and protect its independence as Nigeria approaches another election cycle.
The call follows the recent visit by the NGX Board and Management to President Bola Ahmed Tinubu, which attracted significant public attention and renewed debate over the relationship between the capital market and government.
The concerns centre on the need for the Exchange to preserve its position as a neutral marketplace while avoiding any perception that it has become closely aligned with the administration.
Concern Over Political Perception
The warning follows comments attributed to the NGX’s Group Managing Director highlighting the creation of more than 500,000 millionaires through the market’s recent performance.
While the strong performance of the Nigerian equities market has been widely celebrated, the analysis argues that such claims require careful context, particularly during an election period.
The argument is that the Exchange’s role should remain focused on facilitating capital formation, protecting investors and maintaining a transparent marketplace rather than becoming associated with the political fortunes of any administration.
Market Gains Come With Caveats
Nigeria’s stock market has recorded significant gains, creating substantial increases in market capitalisation and boosting the value of investors’ holdings.
However, the analysis cautions against treating these gains as an automatic measure of broad-based wealth creation.
High inflation can significantly increase nominal asset values, meaning that investors may appear substantially wealthier in naira terms without experiencing a corresponding increase in real purchasing power.
The structure of the market also matters. Several highly capitalised companies have relatively limited free floats, meaning only a portion of their shares is readily available for trading.
When demand rises sharply while available shares remain limited, prices can increase rapidly, potentially creating large paper gains for existing shareholders.
Free Float Raises Liquidity Questions
The relatively low free float of some major NGX-listed companies remains an important consideration for investors.
Where less than 20% of a company’s shares are available for public trading, strong buying interest can push prices higher because the supply of tradable shares is restricted.
This can increase the market value of companies and the apparent wealth of shareholders without necessarily translating into equivalent amounts of cash that can be realised immediately.
The distinction between market valuation and actual liquidity is therefore important when assessing the sustainability of the Exchange’s recent gains.
Government Highlights NGX Performance
The Federal Government and its representatives have increasingly pointed to the performance of the stock market as evidence that economic reforms are delivering results.
The administration’s reform programme has coincided with significant movements in equities, improved investor interest and rising market capitalisation.
However, the analysis argues that the NGX should avoid allowing the market’s performance to become excessively identified with government policy or political messaging.
Such an association could undermine perceptions of the Exchange’s neutrality.
Geregu Default Highlights Potential Risks
The concerns become more significant against the backdrop of developments such as the recent Geregu Power bond default.
Geregu Power reportedly missed scheduled payments on its bond obligations, highlighting the fact that strong headline market performance does not eliminate risks within individual companies or the wider financial system.
The analysis warns that opposition politicians could potentially use negative developments within the market as ammunition if the NGX becomes perceived as closely aligned with the government.
Such politicisation could damage investor confidence, particularly if political disputes begin to influence perceptions of the capital market.
Investor Confidence Remains Critical
A politically polarised capital market could have consequences beyond public debate.
If investors begin to perceive the Exchange as vulnerable to political influence, confidence could weaken and trigger increased selling pressure.
A significant sell-off could put downward pressure on the NGX All-Share Index (ASI) and reduce market valuations, particularly if political uncertainty coincides with broader economic or corporate concerns.
Maintaining confidence therefore requires the Exchange to demonstrate that its operations and market oversight remain independent of political interests.
NGX Must Protect Its Neutral Position
As a self-regulatory organisation (SRO) operating within Nigeria’s regulatory framework, the NGX has responsibilities to its shareholders, investors, market participants and regulators.
Its engagement with government is necessary, particularly on issues involving economic development, capital formation and financial-market policy.
However, the Exchange must also ensure that such engagement does not create the impression of partisan alignment.
The challenge is especially important as Nigeria moves closer to another election cycle, when economic performance and market indicators are likely to become increasingly prominent in political messaging.
Balancing Growth With Independence
The NGX’s recent performance represents an important development for Nigeria’s capital market, but maintaining the gains will require more than rising share prices.
The Exchange must continue strengthening investor confidence, improving market liquidity, protecting its institutional independence and ensuring that all market participants operate under clear and credible rules.
For the NGX, the central task is therefore to celebrate the market’s achievements without becoming part of the political contest surrounding them.
Preserving that distinction could prove essential to ensuring that Nigeria’s capital market remains a credible platform for wealth creation and long-term economic development.
