The Nigerian Exchange (NGX) hit a record high during the first trading session of the week. Surpassing N120 trillion and closing at N122 trillion. Investors gained an impressive N5 trillion in returns within a single day. Marking the strongest daily performance since May 23, 2023. This surge was driven by price rallies in Dangote Cement, Nestle Nigeria, MTN Nigeria, and 53 other stocks.
The NGX appears to be in an “overbought” state, fueled by a euphoric bull run that pushed the All-Share Index (ASI) past 190,000 points. The ASI rose by 7,949.36 basis points (4.36%) to close at 190,262.44 points. With MTN Nigeria and Dangote Cement stocks each gaining 10%. Month-to-date and year-to-date returns climbed to +15.1% and +22.3%, respectively. While the market valuation increased by N5.103 trillion to reach N122.130 trillion.
Market breadth was positive, with 54 stocks advancing and 28 declining. Top gainers, including ABC Transports, Beta Glass, Ikeja Hotels, McNichols, Oando, Jaiz Bank, Aradel Holdings. And Zichis Agro Allied Industries, each recorded a maximum 10% gain.
Technical Indicators Signal Overbought Conditions
The Relative Strength Index (RSI) for the overall market and several blue-chip stocks has consistently stayed above 70–75, indicating overbought conditions. This month’s bullish rally, driven by liquidity from Nigerian pension funds. Has pushed sector-specific indices—particularly Oil and Gas and Banking—into overextended territory. However, these indices slightly cooled to around 63 in late January.
An “overbought” market occurs when prices rise rapidly, often exceeding their underlying value. Despite high valuations, analysts remain optimistic about growth, citing years of strong performance by the NGX.
Key Observations:
- Deviation from Moving Averages: Many leading stocks, such as Seplat Energy and MTN Nigeria, are trading well above their 200- and 50-day moving averages. These stocks have shown “parabolic” price movements, which are often followed by profit-taking.
- Pension Fund Effect: The Nigerian Pension Commission’s (PenCom) decision to increase equity investment limits has injected significant liquidity into the market. This has created a scenario of “too much money chasing too few stocks,” driving valuations higher.
- Dividend Yield Compression: Rising stock prices have reduced dividend yields for income-generating stocks. Making them less attractive compared to fixed-income instruments. Especially with the Monetary Policy Rate (MPR) at 27% as of January 2026.
Market Outlook
Despite high valuations, the Nigerian equity market remains optimistic, supported by sector rotation. Investors are shifting from growth stocks to value and defensive sectors, a typical trend in late-cycle markets. Selective investments in fundamentally strong stocks are expected to dominate. With dividend yields, earnings surprises, and sector-specific developments shaping market trends.
Coronation Asset Management notes, “We expect sentiment to remain cautious in the near term as investors digest recently released full-year results and await further earnings reports and dividend announcements.”
It’s important to note that an “overbought” market does not necessarily signal an imminent crash. Markets can remain overbought for extended periods if earnings continue to justify high prices. However, speculative stocks are often the first to decline in such conditions. Experts advise retail investors to focus on high-quality companies with stable profits, low debt, and strong cash flows.
