It is the fifth month of the year, and if you have been following our previous episodes, you would have noticed shifts in asset allocations as macroeconomic conditions continue to evolve.
The month of MayĀ presents another opportunity to start or rebalance your portfolio.
While the macro environment changes, some core investment principlesĀ remainĀ constant:
- Your investment must generate returns; otherwise, it ceases to be an investment.
- Returns should exceed inflation to preserve purchasing power.
- Risk must be assessed, with higher risk demanding higher returns.
- However, investors must remain cautious about how much they are paying for that risk.
These principles apply regardless of your investment goals or risk tolerance.
Asset classes in focus
Investors typically consider multiple asset classes: equities, fixed income, real estate, mutual funds, and alternatives.
However, recent performanceĀ suggests thatĀ equities have delivered the strongest returns, driven byĀ strong earnings,Ā goodĀ valuation,Ā and macro tailwinds.
Equities: A strong rallyĀ
The Nigerian equities market has posted a remarkable rally in 2026. The All-Share Index (ASI) gained 20.36% in April, pushing year-to-date returns to 55.69%, already surpassing the 51% recorded in 2025.
MarketĀ capitalizationĀ has risen to about N156 trillion, driven by large-cap stocks such as MTN Nigeria, BUA Cement, Dangote Cement, andĀ Aradel, each adding over N5 trillionĀ so farĀ this year.
Sector performance has been equally strong:
- Oil & Gas surged, supported by Aradel (N5.9 trillion gain) and Seplat (N3.34 trillion), pushing the sector index up 128% YtD.
- Industrial goods rose 99%, led by cement giants, adding over N17 trillion in value.
- Banking stocks also rallied, with Zenith, GTCO, Stanbic IBTC, and Ecobank each gaining over N1 trillion, contributing to a 51% YtD increase.
- Even low-cap stocksĀ have performed very well.Ā ZichisĀ AgroĀ Allied, with a market cap of about N26 billion, delivered over 1,000% share price growth.
Market activity remains dominated by domestic investors. Total transactions stood at N4.1 trillion as of March, with N3.6 trillion from local investors.
- Institutional participation rose significantly to N2.15 trillion, while retail investors contributed N1.45 trillion,Ā indicatingĀ improving market depth.
Fixed income:
The fixed income market continues toĀ benefitĀ from strong liquidity. The OMO stop rate is around 22%, while Treasury bill yields range between 15% and 17%, broadly in line with inflation at 15.38%.
- Corporate issuers are also active, with commercial paper yields between 18% and 24%, offering attractive income opportunities.
However, while yields remain compelling, the upside isĀ relatively limitedĀ compared to equities.
What is driving the market?Ā
Market performance in 2026 has been shaped largely by macro factors, particularly the IsraelāIran conflict, which began on February 28.
The resulting rise in crude oil pricesĀ has:
- BoostedĀ strong investor sentiment in theĀ upstream oil companies likeĀ Seplat,Ā Aradel, and Oando, driving share price gains
- Improved outlook for banks exposed to oil and gas lending through potential loan recoveries
- At the same time, rising energy costs have pressured consumer goods, industrial companies, and some banks, increasing input costs, operational expensesĀ and potentially compressing margins.
Where to investĀ
Nigerian equitiesĀ remainĀ one of the most attractive asset classes for investors. As inflation is expected to rise further, equities provide a clear path to inflation-beating returns.
By April, over 70 stocks delivered returns above the 15.38% inflation rate, and more than 60 stocks still exceeded an assumedĀ 25% inflation rate,Ā even withoutĀ dividendsĀ withĀ banking and industrial sectors dominatingĀ this category.
That said, we recommend focusing on stocks with strong fundamentals and good liquidity, avoiding those in overbought territory
Performance of prior callsĀ
In January, we recommended investing N1.5 million in banking stocks, specifically in Zenith Bank, Wema Bank, GTCO, UBA, and FirstHoldco. Except for FirstHoldco, the other stocks had gains between 6% to 16%.
Since then, performance has strengthened, with Zenith, GTCO, Access, Stanbic, Wema Bank, and ETI delivering returns above 25%.
The Oil and Gas sector
In 2025, the sector index posted a negative return of -1.54%, ended January with 13.8% gain and now 128% gain in April.
In January, we recommendedĀ allocatingĀ up to N1 million acrossĀ SeplatĀ Energy andĀ AradelĀ Holdings.
- AradelĀ Holdings traded at N780 in January, up 16.45% at the time. Fast forward to April, the stock has surged over 202%, closing at N2,024 per share.
- SeplatĀ Energy closed January at N6,700 (up 15% then), and has since rallied to N11,495, delivering a 98%Ā YtDĀ return.
Agriculture:
In the agriculture sector, while Zichis Agro Allied leads in terms of share price valuation with an impressive 1,000% gain, Okomu Oil and Presco are well-established, mature companies with strong market presence and solid fundamentals.
BothĀ OkomuĀ OilĀ andĀ PrescoĀ have shown remarkable growth, withĀ share price increasesĀ fromĀ 10% in JanuaryĀ to overĀ 50% year-to-date (YtD)Ā by the end of April 2026
Selected Stocks (Diversified allocation):
We also recommended exposure to MTN Nigeria, BUA Foods, and Dangote Cement, alongside Academy Press, Custodian Investment, and NEM Insurance.
MTN Nigeria hasĀ emergedĀ as the mostĀ capitalizedĀ stock at about N19 trillion, with a 79%Ā YtDĀ gain, rising from N572 to N915. Despite the rally, itĀ remainsĀ attractive given its earnings strength and market dominance.
Top five stocks to watch in May 2026Ā
Based on current trends, these five stocks are on analystsā watchlists, although the list is not exhaustive.
- MTN Nigeria (MTNN): Strong earnings growth and market leadership. Although it appears expensive,Ā butĀ it has strong upside potential
- ZenithĀ Bank: The most profitable listed bank on the NGX withĀ strong growthĀ potential. Ā Its strong dividend payout makes it attractive, especially for income-oriented investors.
- GTCO:Ā Consistent profitability and strong dividend payout record.Ā Its relativeĀ strengthĀ indexĀ at 60 is not overbought yet. Return on equity of 28% is reasonable.Ā Ā Analysts estimate that the stock offers a strong upside potential of about 72% from its current price of N135 per shar
- AradelĀ Holdings: High-growth upstream performer
- AIICOĀ has been one of the best-performing insurance stocks in recent years. In 2025, it was the 3rd best-performing insurance stock, with a YtD gain of 165% following a 78% gain in 2024. From N0.55 in 2021 to current N4.31, the insurerās stock has significantly outperformed its long-term average price of N1.2.
Also, the relative strength index (RSI), which measures the speed and changes of price movements at 58.40, is in a near-neutral position, indicating that the stock is neither overbought nor oversoldāan indication of a favourable entry point.
These stocks span key sectors,Ā telecoms, banking, energy, and agriculture offering a mix of growth, income, and resilience.
Overall, in May, focus more on stocks, stick to strong companies, and avoid buying stocks that have already risen too much
