Operators have expressed concern that the Nigerian stock market may face a difficult second half (H2) with rising political risk and the much-anticipated initial public offering (IPO) of Dangote Petroleum Refinery and Petrochemicals is expected to trigger heavy portfolio adjustments.

Speaking on expectations for the stock market in the second half of 2026, the operators warned that increasing political activities ahead of the 2027 general elections could heighten market uncertainty and influence trading decisions, keeping the equities market under pressure in the coming months.

They, however, expressed optimism that the market would regain strength after the completion of the IPO, supported by improved investor confidence and the release of companies’ half-year financial results.

Executive Director of Halo Capital Management Limited, Dr Paul Uzum, said the expected listing of Dangote Refinery would be the single biggest factor shaping activities in the equities market over the coming months.

“The key stock market driver for the second half of 2026 is the Dangote Refinery IPO, which is expected to open in late August or early September. This is a very significant transaction because the company is expected to raise about $5 billion from investors.”

He explained that the size of the offer would likely trigger widespread portfolio rebalancing as many investors would sell existing shares to free up funds for the highly anticipated public offer.

“This could put pressure on the broader market and keep share prices subdued in the weeks leading to the offer,” he said.

Uzum noted that some stability could return to the market by the end of July, when many listed companies are expected to release their half-year financial results.

“Strong corporate earnings and interim dividend announcements from some companies should provide some level of stability and support investor confidence,” he added.

He also pointed to the growing political activities ahead of the 2027 elections as another factor that could affect market sentiment.

“Some foreign investors may continue reducing their exposure to the Nigerian market as they traditionally scale back investments ahead of an election year because of uncertainty. At the same time, some politicians may also be on the sell side as they seek to raise funds to support their election campaigns.”

Uzum said the combined impact of the Dangote Refinery IPO, profit-taking by investors, foreign portfolio outflows and election-related fundraising could keep the equities market in negative territory over the next few months.

“I expect the market to remain bearish until the Dangote Refinery IPO is concluded in September. Once the offer is completed and the pressure from portfolio adjustments eases, the market should begin to recover. I expect a rally after the IPO, with the market regaining much of the ground that may have been lost during the offer period,” he said.

Vice President of Highcap Securities Limited, David Adonri, expressed optimism that the Nigerian equities market would recover in the third quarter (Q3) despite the recent wave of profit-taking and price corrections, saying history suggests that the current downturn is likely to be temporary.

“Based on historical market trends, the equities market is expected to begin a gradual recovery in the third quarter after the current round of significant corrections. Similar market cycles have occurred in the past, with investors returning to the market once share prices become more attractive.”

He explained that the expected recovery would largely be supported by the release of strong Q2 corporate earnings, which could restore investor confidence and stimulate fresh demand for equities.

Adonri, however, warned that the pace of the recovery could be affected by growing political uncertainty ahead of the 2027 general elections as well as the possibility of rising inflation.

“While the market is expected to recover, the rebound may face headwinds from heightened political risk and a possible spike in the inflation rate. These factors could make investors more cautious and slow the pace of the recovery,” he said.

He noted that the market outlook could improve considerably if Dangote Refinery proceeds with its proposed listing on the Nigerian Exchange in the second half of 2026.

Vice President of Highcap Securities Limited, David Adonri, has projected a brighter outlook for the Nigerian equities market in Q3, saying the current market correction is part of a normal cycle that has historically been followed by a rebound.

He said the expected recovery would be supported by the release of Q2 financial results, adding that strong corporate earnings would improve investor confidence and encourage renewed buying in fundamentally sound stocks.

Adonri, however, warned that the anticipated recovery could be weakened by increasing political activities ahead of the 2027 general elections and a possible rise in the inflation rate.

According to him, the listing of Dangote Refinery could deepen the capital market, boost liquidity, attract fresh domestic and foreign investment and usher in a strong bullish run after the current period of correction.