Election risks may weigh on stocks again – GTI

Nigeria’s stock market may face renewed pressure in the second half of 2026 as investors begin to factor in political uncertainties ahead of the 2027 general elections, according to a new report by GTI Research.

The investment research firm warned that historical trading patterns observed during previous pre-election cycles suggest that the Nigerian equities market could experience weaker performance in the months leading up to the elections, despite the strong gains recorded earlier in the year.

In its latest seasonality study, GTI Research examined the performance of the Nigerian Exchange’s All-Share Index during the country’s last three pre-election years—2014, 2018, and 2022. The analysis found a recurring pattern in which stocks typically deliver strong returns in the early months of a pre-election year before losing momentum as election-related uncertainties intensify.

According to the report, investors generally enter the year with optimism driven by portfolio rebalancing, corporate earnings expectations, and improved market sentiment. However, as election campaigns gather pace and policy uncertainties increase, many investors adopt a more cautious approach, resulting in weaker market activity and increased volatility.

The Head of Research at GTI, Abiodun Ogunniyi, noted that while historical patterns provide useful insights, they should not be viewed as a guarantee of future market behaviour. He explained that financial markets are influenced by a range of factors beyond election cycles, including macroeconomic conditions, monetary policy decisions, oil prices, foreign investment flows, and regulatory developments.

The report showed that January has historically been one of the strongest months for Nigerian equities during pre-election years, with returns ranging from eight to 15 per cent. Positive momentum often extends into the second quarter as investors take positions in anticipation of favourable earnings announcements and dividend payments.

However, market sentiment typically begins to weaken between June and August. During this period, political developments, campaign activities, and uncertainty regarding future government policies often cause investors to reduce risk exposure. Foreign portfolio investors, who are particularly sensitive to political risk, may also scale back participation, contributing to lower liquidity in the market.

GTI’s findings identified September and October as the most vulnerable months during previous pre-election cycles. Historical data reviewed by the firm showed that the market recorded declines ranging from seven to 12 per cent during those months. The downturns were attributed to rising political tensions, increased investor caution, and concerns over economic policy continuity.

Despite these challenges, the report highlighted that the market has historically demonstrated resilience. Equity prices often recover toward the end of the year as investors gain greater clarity about the political landscape and begin positioning for opportunities created by earlier market weakness.

The research firm therefore advised investors to adopt a tactical approach rather than relying solely on long-term buy-and-hold strategies during pre-election periods. Investors were encouraged to closely monitor market conditions, diversify portfolios, and focus on fundamentally strong companies capable of weathering periods of heightened volatility.

Analysts said sectors with stable earnings, strong dividend histories, and defensive characteristics could attract increased investor attention if political uncertainty rises in the months ahead. Such stocks are often viewed as safer investments during periods when broader market sentiment weakens.

The report comes at a time when Nigeria’s capital market has benefited from several positive developments, including ongoing reforms aimed at improving market efficiency and attracting investment. Recent initiatives by the Nigerian Exchange to deepen liquidity and enhance trading operations have been welcomed by market participants seeking greater transparency and efficiency.

GTI also pointed to structural developments that could influence market performance differently from previous election cycles. These include anticipated improvements in market infrastructure, changes in settlement processes, and expectations of increased participation from both domestic and foreign investors.

In addition, broader economic reforms implemented by the Federal Government may play a significant role in determining investor confidence. Analysts noted that progress in fiscal management, inflation control, exchange-rate stability, and economic growth could help offset some of the negative effects traditionally associated with election periods.

Market experts stressed that political uncertainty does not automatically translate into poor investment outcomes. Instead, they argued that periods of volatility often create opportunities for disciplined investors willing to identify undervalued assets and maintain a long-term perspective.

As Nigeria gradually moves toward another election cycle, investors are expected to pay close attention to both political and economic signals. While GTI’s research suggests that historical trends point to potential headwinds for equities in the second half of the year, the firm maintained that market outcomes will ultimately depend on a combination of policy decisions, economic performance, investor sentiment, and the evolving political environment.

For now, the message from GTI is clear: election-related risks are returning to the investment conversation, and market participants will need to remain vigilant as the road to 2027 unfolds.