Dangote IPO, insurance recapitalisation to drive new era of market liquidity

Nigeria’s capital market is heading into another year of heavy equity issuance and potential consolidation, as insurance recapitalisation pressures and a planned 2026 listing of Dangote Petroleum Refinery extend the momentum seen in the banking-led capital raise of 2025.

The convergence of regulatory mandates and a landmark energy-sector transaction is expected to sustain primary market activity after lenders raised more than N3 trillion through rights issues and public offers last year to meet recapitalisation requirements.

In its Nigeria capital markets report, Udo Udoma & Belo-Osagie (UUBO) said “the momentum in capital raising activity, through both equity and debt, is also expected to accelerate in 2026,” adding that equity capital raising and mergers and acquisitions transactions are likely toward the end of the year and into early 2027.

Insurance companies are now at the centre of that projection following the Nigerian Insurance Industry Reform Act 2025, which requires life, non-life, composite insurers and reinsurers to meet higher minimum capital thresholds by July 30, 2026.

A significant number of the more than 50 operators are believed to remain undercapitalised, leaving many to tap the market in the first half of the year or pursue mergers.

UUBO noted that “the Nigerian insurance sector is poised to be the next epicentre of capital raising activity in 2026, taking the baton from the banking sector,” anticipating “a flurry of rights issues” as firms seek funds from existing shareholders, with public offers likely for smaller players unable to bridge capital gaps internally.

Read also: What Nigeria’s bank recapitalisation means for the economy

The recapitalisation drive is expected to trigger consolidation, as weaker firms combine with stronger Tier-1 insurers to meet regulatory thresholds and expand underwriting capacity in oil, gas and aviation risks currently dominated by foreign players.

The shift follows an intense year for banks after the Central Bank of Nigeria’s recapitalisation directive. Guaranty Trust Holding Company, Zenith Bank, FCMB Group and Sterling Financial Holdings all accessed the market in 2025, drawing strong retail participation, while Fidelity Bank’s offer was oversubscribed by 237 percent.

The equities market climbed to record highs during that issuance wave, with the NGX All Share Index crossing 148,000 points before a sharp correction triggered by capital gains tax changes under the Nigeria Tax Act 2025.

The adjustments, which aligned capital gains tax on share disposals with income tax rates and effectively raised the rate for many investors from 10 percent, sparked a sell-off that erased between N2.5 trillion and N3 trillion from market capitalisation in days.

Attention is now turning to Dangote Petroleum Petrochemicals, with Aliko Dangote confirming plans to list between five and ten percent of the refinery business on the NGX in 2026.

Investors would subscribe in naira but receive dividends in US dollars, backed by the refinery’s projected $6.4 billion annual export revenue, a structure designed to hedge currency risk and attract foreign portfolio inflows.

UUBO described the listing as “the landmark transaction of the year if implemented,” saying it could significantly increase total NGX market capitalisation. With no comparable energy-sector listing in view, the refinery’s debut could materially alter sector weightings on the exchange.

Beyond corporates, capital market operators are also facing higher capital thresholds after a January circular from the Securities and Exchange Commission. Issuing houses must now hold between N2 billion and N7 billion, depending on the underwriting scope, while stockbrokers are required to maintain N600 million.

Though compliance runs to June 2027, the new requirements are already expected to spur private capital raising and strategic combinations.

Debt markets are also expected to remain active. Commercial paper approvals in 2025 reached nearly N684 billion, and although inflation and policy rates are projected to moderate, interest rates are likely to stay relatively elevated, sustaining demand for short-term instruments.

Analysts say regulatory deadlines, a mega listing, and intermediary recapitalisation will keep primary issuance elevated through the year. However, investor sentiment remains sensitive to policy signals after the November tax-driven sell-off, leaving execution risk around insurance rights issues and the Dangote listing as key determinants of whether 2026 delivers lasting market depth.