Introduction
Nigeria’s capital market has been central to the nation’s economic aspirations, yet the evidence shows a troubling decline in relevance. According to data from the Nigerian Exchange Group, the number of new listings has remained stagnant in the last decade, while daily trading volumes have failed to keep pace with the size of the economy. Retail investors, who should provide depth and vibrancy, account for less than 10 per cent of market activity. Foreign portfolio participation, once a strong source of liquidity, has dropped sharply in recent years, constrained by currency volatility and confidence gaps.
These realities create a painful contradiction. Nigeria is Africa’s largest economy with a young and digitally connected population, yet its capital market is underutilised, shallow, and unattractive to the very investors it was designed to serve. By comparison, emerging markets in Asia and the Middle East have embraced digital infrastructure that allows fractional ownership, instant settlement, and broader investor participation. The result has been stronger liquidity, broader access to capital, and renewed confidence in their exchanges.
Nigeria’s market now faces a pivotal choice. It can persist with legacy systems that exclude the majority and restrict inflows, or it can embrace tokenisation as a structural reform that unlocks retail participation, enhances transparency, and attracts domestic and foreign capital. The cost of inaction is already evident in declining portfolio inflows, weak IPO activity, and a growing reliance on offshore investment vehicles. Tokenisation offers a chance to reverse this trajectory and reposition the Nigerian capital market as a credible engine of inclusive economic growth.
The Structural Weakness in Nigeria’s Capital Market
A well-functioning capital market should channel long-term savings into productive investment, yet in Nigeria, the system remains constrained by several entrenched weaknesses. Liquidity is concentrated in a handful of blue-chip equities, leaving most listed companies thinly traded and unattractive to institutional investors. This lack of depth discourages new entrants, creating a cycle where potential issuers prefer to seek funding outside the exchange.
Investor participation is another structural gap. Retail investors, the foundation of strong global capital markets, remain marginal players in Nigeria. The barriers are both practical and psychological. On the practical side, high transaction costs and complex onboarding processes discourage mass participation. On the psychological side, years of volatility and limited transparency have created deep mistrust. This has led many Nigerians to seek alternative investment options in real estate, informal schemes, and offshore platforms rather than the domestic market.
Finally, technology adoption has lagged. While other markets have embraced digitised instruments and real-time settlement to broaden access, Nigeria continues to operate with legacy infrastructure that limits innovation. Without meaningful technological transformation, the market risks being left behind in an era where investors demand speed, transparency, and flexibility.
These weaknesses collectively explain why the Nigerian capital market is not yet fulfilling its mandate of mobilising savings at scale and channelling them into national development. They also highlight why structural innovation, not incremental reform, is required.
Tokenisation as a Structural Solution
Nigeria’s capital market is already showing signs that it may be ready for structural reforms. Retail investor activity on the Nigerian Exchange (NGX) surged to ₦1.19 trillion between January and May 2025, compared with ₦885 billion in the same period in 2024, representing a 35 per cent growth.
According to data from the Nigerian Exchange (NGX), domestic investors also accounted for roughly 71 per cent of total equity transactions in the first five months of 2025, reinforcing their dominant role in market activity. At the same time, foreign portfolio inflows have been volatile, with April 2025 volumes falling by over 90 per cent compared to March, underscoring the fragility of external participation.
Tokenisation is not currently a leading driver of activity on the Nigerian Exchange, but the framework provided by the Investment and Securities Act (ISA) 2025 creates a regulatory foundation for it to become transformative in the near future. Tokenisation has strong potential to address three key market weaknesses:
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Lowering Barriers for Retail Participation
Many individual investors are discouraged by high minimum ticket sizes. Tokenisation could enable fractional ownership, allowing smaller sums of money to access assets that are currently out of reach.
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Increasing Transparency and Trust
Investor sentiment has been dampened by regulatory unpredictability and concerns about opacity. Recording assets on secure, traceable platforms would help reduce risk perceptions and build confidence.
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Reducing Settlement Friction and Enhancing Liquidity
Delays in settlement and high transaction costs make frequent trading less viable. Tokenised assets designed with faster settlement could reduce friction, making the market more attractive to domestic and foreign investors.
These interventions are not speculative. Given the growing trend of retail participation, the dominance of domestic trade activity, and the sharp swings in foreign inflows, Nigeria has a real opening to combine these reforms with tokenisation. If properly regulated, tokenisation could be an innovation that helps resolve persistent structural weaknesses and positions the Nigerian market for more sustainable growth.
Global Precedents That Nigeria Cannot Ignore
Several emerging markets have already demonstrated that tokenisation can transform their capital markets, offering Nigeria valuable precedents.
- Brazil: The Brazilian Stock Exchange (B3) has piloted tokenised debentures and real estate funds, allowing smaller investors to access instruments traditionally reserved for institutions. The result has been stronger retail participation and expanded liquidity in domestic assets.
- India: Through its regulatory sandbox, India has enabled tokenised government securities on blockchain platforms. This experiment has improved settlement times and attracted fintech innovators to collaborate with the exchange, helping modernise its infrastructure without disrupting financial stability.
- Singapore: The Monetary Authority of Singapore has led the development of tokenised bond and asset pilots. This has positioned Singapore as a regional hub for digital capital flows, reinforcing investor confidence in its regulatory foresight.
The common thread across these markets is not technology for its own sake but regulatory leadership that recognised tokenisation as a structural enabler. Each market matched innovation with governance, creating frameworks that encouraged investor trust while unlocking new participation channels.
For Nigeria, tokenisation is not a speculative experiment but a tested pathway that can deepen markets, attract new classes of investors, and reposition the exchange as a relevant engine of national development. The choice is whether to adopt these reforms now or risk being left behind as peers advance.
The Path Forward for Nigeria’s Capital Market
For tokenisation to move from concept to practice in Nigeria, coordinated action is required across policy, regulation, and market infrastructure. The following steps can lay the foundation:
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Establish a Regulatory Framework for Tokenised Assets
Regulators should develop clear guidelines that define tokenised securities, outline compliance requirements, and provide investor protections. This clarity will reduce uncertainty and encourage innovation.
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Create a Pilot Programme within the Nigerian Exchange
A structured pilot involving tokenised equities, bonds, or mutual funds can demonstrate feasibility while managing risks. Similar pilots in India and Brazil have shown that incremental adoption builds confidence without destabilising markets.
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Expand Retail Participation through Fractional Access
By enabling tokenised instruments to be purchased in smaller units, the exchange can open participation to millions of Nigerians currently excluded due to high entry thresholds.
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Strengthen Market Infrastructure for Digital Settlement
Settlement systems should be upgraded to handle near-instant transactions securely. This would align Nigeria’s market with global standards and reduce operational bottlenecks.
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Build Partnerships with Fintech Firms
Fintech innovators already operate the digital rails that reach Nigeria’s youth and SMEs. Structured partnerships with these firms will accelerate adoption and ensure that tokenised products are accessible to a broad audience.
Taken together, these measures can transform tokenisation from a theoretical option into a practical reform agenda. More importantly, they can reposition Nigeria’s capital market as a credible platform for mobilising domestic savings and attracting foreign inflows at scale.
Conclusion
Nigeria’s capital market has reached an inflexion point. The weaknesses of shallow liquidity, low retail participation, and declining foreign inflows are no longer cyclical setbacks but structural challenges. Tokenisation provides a credible pathway to address these issues by widening access, improving transparency, and aligning the market with global investment trends.
The choice before policymakers and market leaders is straightforward. Continue with incremental reforms that preserve the status quo, or embrace tokenisation as a defining reform that can restore relevance and rebuild confidence. The experience of peer markets demonstrates that adopting tokenisation is neither experimental nor premature; it is a proven step toward revitalising the role of capital markets in national development.
If Nigeria is to mobilise the scale of investment required for growth, it must act decisively. Tokenisation is more than a technological upgrade. It is a strategic decision about whether the capital market will serve as a driver of inclusive economic progress or remain on the margins of the digital economy. The urgency is real, and the window of opportunity is narrowing.
pcl. can play a catalytic role in this transition by advising regulators on clear frameworks, guiding the Nigerian Exchange on pilot implementation, assessing infrastructure readiness, and building capacity across market operators. By combining local expertise with global insights, pcl. is well-positioned to help translate tokenisation from concept into a practical reform agenda that restores confidence and deepens Nigeria’s capital market.
Written by:
Sunday Kolawole
Commercial