ABUJA: The Nigerian equities market recorded a N2.5 trillion decline in market capitalisation in August 2026, as the Central Bank of Nigeria’s revised Open Market Operations policy intensified competition for investors’ funds and contributed to cautious sentiment on the Nigerian Exchange Limited.
Market capitalisation fell to N155.83 trillion at the close of trading on August 28, from N158.33 trillion recorded on July 31, representing a decline of N2.5 trillion or 1.6 per cent.
The decline came amid persistent profit-taking and portfolio reallocation from equities into fixed-income instruments offering relatively attractive yields.
However, the market staged a strong recovery toward the end of the month, gaining N1.67 trillion between August 27 and 28 following Nigeria’s confirmed return to the FTSE Russell Frontier Market Index.
FTSE Russell confirmed on August 27 that Nigeria’s reclassification from Unclassified to Frontier Market status would take effect from the market opening on September 21, 2026.
The confirmation followed an additional assessment of Nigeria’s transition from a T+2 to T+1 settlement cycle after international market participants raised concerns that the change could create a de facto prefunding requirement for foreign institutional investors.
Despite the late-month recovery, the NGX All-Share Index closed at 241,298.47 points on August 28, down 3,985.21 points or 1.6 per cent from the 245,283.68 points recorded at the beginning of the month.
The index nevertheless maintained a strong year-to-date performance of 55.06 per cent as of August 28.
The latest market pressure coincided with changes introduced by the CBN to its OMO framework.
In a circular dated August 12, 2026, the Acting Director of the CBN’s Financial Markets Department, Okey Umeano, announced that participation in both the primary and secondary OMO markets would be opened to all eligible investors through Deposit Money Banks.
Under the revised framework, individuals, corporates and non-bank financial institutions can participate in OMO transactions through commercial banks, which will submit bids and settle transactions on behalf of their customers.
The broader access represents a significant change from the previous framework, under which participation was largely concentrated among institutional investors.
The revised framework also removed some restrictions affecting banks’ access to the CBN’s Discount Window when participating in OMO and foreign exchange market transactions.
However, the restriction preventing banks from accessing the Discount Window while simultaneously participating in OMO auctions on the same day remains.
Analysts said the expanded access to OMO bills could increase competition for funds between the equities and fixed-income markets, particularly as OMO instruments offer yields of more than 20 per cent.
At an OMO auction conducted on August 13, the CBN offered N600 billion worth of bills, with stop rates reaching 20.39 per cent.
The 103-day and 138-day instruments attracted total subscriptions of N4.9 trillion, while successful bids amounted to N2.6 trillion, highlighting strong investor demand for the instruments.
Analysts expect the elevated OMO yields to eventually influence deposit rates as banks compete to retain funds that could otherwise move into higher-yielding fixed-income investments.
They also anticipate a gradual convergence between Treasury Bill and OMO yields, potentially narrowing the existing yield gap between instruments with comparable maturities.
The August auction formed part of the CBN’s aggressive liquidity-management operations.
The apex bank had injected a net N5.21 trillion into the banking system, including a single N2.48 trillion OMO repayment on August 11.
This was followed by N4.7 trillion mopped up through OMO auctions conducted on August 3 and 4, while more than N7 trillion had been absorbed through similar operations in July.
Despite the significant liquidity withdrawals, demand for OMO instruments remained strong, suggesting that substantial liquidity continues to exist within the financial system.
With OMO stop rates around 20.4 per cent and significantly above yields on comparable Treasury Bills, the instruments have become increasingly attractive to investors seeking relatively low-risk returns.
Market analysts said the revised OMO framework could keep sentiment on the equities market cautious in the short term as investors reassess portfolio allocations.
Profit-taking and a shift toward commercial papers, bonds and money-market funds have also continued to weigh on equities.
Cowry Assets Management Limited said the equities market could remain volatile in the short term amid continued profit-taking, although it maintained a cautiously positive medium-term outlook.
The firm said strong corporate earnings and attractive valuations could continue to support fundamentally sound stocks.
Similarly, Cordros Securities Limited said market sentiment was likely to remain cautious in the absence of clear near-term catalysts.
The firm noted that attractive short-term fixed-income yields could continue to compete with equities for investor funds, particularly under the CBN’s revised OMO framework.
For investors, the combination of high fixed-income yields, aggressive liquidity management and profit-taking could continue to shape trading patterns in the coming weeks, even as Nigeria’s return to the FTSE Russell Frontier Market provides a potential medium-term boost to market sentiment.
