The Nigerian main index, the NGX All-Share Index, has posted a gain of nearly 60% since the beginning of the year, heading toward its best annual performance since 2007, when it rose 74%. On paper, the movement is impressive. The Lagos-based Nigerian Exchange has established itself as one of the most dynamic stock markets of the year, as highlighted in a report published by Bloomberg this week.

But digging deeper reveals that the rally tells a more nuanced story. The Nigerian market is tiny on a global scale, with a median market capitalization of approximately $35m for listed companies. In such a narrow market, even modest inflows are enough to trigger spectacular price movements.

Penny Stocks in Orbit

Among the strongest performers of the year are a series of small caps with dizzying returns: Fortis Global Insurance has soared over 400%, SCOA Nigeria is up 360%, R.T. Briscoe 280%, Red Star Express 250%, and Union Dicon Salt nearly 250%.

While the entire index is rising, the bulk of the euphoria stems from highly speculative stocks, which are often illiquid and sometimes difficult to link to any real fundamental improvement.

Source: MarketScreener

The Strange Case of Union Dicon Salt

Union Dicon Salt has produced almost no salt since 2004. Its factory has been idle for years, losses are mounting, and its main shareholder appears to have vanished. Operationally, the company is virtually at a standstill.

Yet, on the stock market, the share price has skyrocketed nearly 250% since January 1. The stock moved from approximately 7 NGN in January to over 23 NGN. Even management cannot explain the move. Alfred James, a director at the company, told Bloomberg that the firm has not paid a dividend in years. According to him, investors seem to be clinging to the idea that something might happen. This increase is not based on earnings, dividends, or growth, but on the hope of a new market movement.

Retail Investors Join the Fray

This speculative fever is fueled by the rising influence of retail investors. By late 2025, they accounted for about a third of trading on the Nigerian Exchange, up from a fifth a year earlier.

On certain trading applications, accounts can be opened with as little as 5,000 NGN, or less than $5. Retail investors who may not have the means to buy the market's major blue chips are instead flocking to small caps.

Penny stocks are the ideal playground for them. With a few thousand naira, they can purchase a large number of shares and hope for a quick gain. This is exactly the type of mechanic that feeds a bubble in a small market.

A Fragile Rally

The rise of the Nigerian stock market is not entirely disconnected from reality. Some large-cap stocks have genuine growth drivers. Dangote Cement has doubled since the start of the year, and oil companies like Seplat are benefiting from a favorable environment.

However, the most spectacular part of the rally is concentrated in illiquid small caps, attracting retail investors with the notion that a stock that is going up can continue to go up simply because it has already done so.