NGX lost N13 trillion in June — Here’s how to separate bargains from traps
NGX lost N13 trillion in June — Here’s how to separate bargains from traps
The month of June 2026 was not particularly a good month for Nigerian equities investors.
Nigerian equity market shed over N13 trillion in a single month, and the bleeding was not confined to a handful of weak names; most stocks on the exchange closed the month lower than they started it.
For anyone holding shares, or thinking about buying into it, the question that matters now isn’t “did this fall?” Almost everything did. The question is: which of these falls are opportunities, and which are warnings?
The market has rough language for how far a fall must go before it means something different. A decline of 10% or more from a recent peak is a correction; normal, if uncomfortable.
A decline of 20% or more is a bear market; a more serious retreat suggesting sentiment itself has shifted.
Beyond that, once declines approach 40%, some analysts consider the market to be in crisis territory, though that’s a description of severity rather than a strict, agreed threshold; a true “crash” is usually defined by how fast a market falls, not just how far.
June, for a large stretch of the NGX, sat somewhere between correction and bear-market territory; exactly the environment where the difference between a genuine bargain and a falling knife matters most.
In a broad selloff, good businesses and struggling ones get sold off together, for the same reasons, by the same panicked sentiment. The market doesn’t pause asking which is which. We have to.
Every investor has heard the pitch: “This stock is trading at a discount, buy now.” But a falling price alone tells you almost nothing; it can mean the market overreacted, or that something is genuinely wrong.
At Nairametrics, when we screen the NGX for stocks worth a second look, we ask three questions, in order, and a stock must answer all three before it earns a place.
1. Has the price actually fallen and by how much?
The starting point: how far is a stock trading below its highest price in the last year; its 52-week high?
For this analysis, we set our own cutoff at 15%; a stock has to be trading at 85% of its 52-week high or lower before we look further.
This isn’t an industry-wide rule about the way the correction and bear-market lines are; it’s the standard we chose, deliberately conservative, so a stock has to show a real, meaningful pullback before it earns a second look. Anything closer than that; say, trading at 90% or 95% of its high hasn’t really pulled back.
This step tells you which stocks have room between where they are and where they’ve been, not why.
Take two real names from different sectors, this year: Okomu Oil and Zenith Bank both ended up roughly 20% below their 52-week highs.
On the surface, there are identical situations. But Okomu Oil’s fall came after a strong run-up, from a business still posting an 80% return on equity; the discount looked more like a pause than a warning.
Zenith Bank’s fall came with the stock trading below its own book value, a different kind of signal. Both pass step one and neither tells the full story yet.
2. Is it cheap, or does it just look cheap?
This step separates a genuine bargain from a trap, and it’s the one most retail investors skip.
Prices have fallen across the board, which might make now a good entry point, but a fallen price alone does not make a stock cheap.
A share price is meaningless without knowing what it’s buying you. A N10 stock can be expensive; a N2,000 stock can be cheap. What matters is price relative to what the company actually earns.
That’s what P/E (price-to-earnings) measures: if a company kept earning at its current rate, how many years would it take to earn back what you paid for the stock? A P/E of 5 means five years; a P/E of 40 means forty.
Jaiz Bank is a good illustration here. The bank looked cheap compared with other banking stocks because it traded at the biggest discount in the sector; 52% of its 52-week high.
But the numbers show it is not truly cheap. Investors are paying over N11 for every N1 earnings more than twice the banking sector average. In simple terms, it will take over 11 years to recover your investment, compared to an average of 6 years for the banking sector. So, the drop in price might make a good entry point, but that does not make it cheap. In fact, it is more expensive compared to other banking stocks.
Apart from the P/E ratio, you also have to look at PEG. A lower P/E ratio suggests a cheaper stock, but a low P/E can be a trap too, and that’s exactly what PEG explains, by weighing the multiple against earnings growth.
A stock with a low P/E and strong earnings growth is a genuinely different story from a stock with a low P/E and flat or shrinking earnings, even though both look identical on P/E alone.
Wema Bank is a good illustration here. Its P/E ratio of 3.7 is lower than the banking sector average, and even lower than Jaiz Bank’s. But its PEG ratio is very low too, 0.05, due to its strong earnings growth, the highest in the sector.
Unlike Jaiz Bank, where a low-looking number hid an expensive stock, Wema Bank’s low P/E is genuinely backed by the business growing fast enough to justify it. So, while Wema Bank is trading at about 75% of its 52-week high, compared with Jaiz Bank’s 52%, the earnings multiples suggest Wema Bank is the cheaper stock
3. Is there something specific that could change this in the next six months?
The simplest of the three questions, and the easiest to skip: is there a real, nameable reason this could turn around soon?
Not a ratio, not a score; an actual event or trend you could point to on a calendar or in the news, not just a hope the market “comes to its senses.”
A few live examples heading into H2: the ongoing FTSE Russell review of Nigeria’s market status, which affects how much foreign passive money flows in or out.
The shift to T+1 settlement, which changes how quickly trades clear and how comfortable foreign investors are trading Nigerian names.
The CBN’s HoldCo structure requirements, which triggered the banking-sector selloff behind names like GTCO and FirstHoldCo; a policy overhang, not a company-specific problem.
NAICOM’s recapitalisation deadline for insurers, forcing consolidation and repricing across that sector.
The federal government’s aggressive borrowing, which has pushed fixed income yields higher and made equities compete harder for the same money; a 17.34% T-bill is exactly the kind of number that raises the bar for what a stock needs to deliver to justify the risk.
A stock can be cheap and healthy and still be a bad pick if nothing on the horizon can close the gap that’s not a discount, just a stock that could stay cheap indefinitely.
Zenith Bank trading below book value and at a low earnings multiple is interesting on its own, but far more compelling with Q2 results due within weeks, giving the market a concrete moment to reassess.
A stock with no boardroom politics, happening, no policy shift, and no sector-wide story behind its discount is the one to be most cautious about, however cheap it looks on paper.
Why all three matter together
Each question catches a different mistake. Skip question one, and you’re buying at random prices with no sense of what’s actually moved.
Skip question two, and you’ll mistake a stock’s small dip for a bargain or a company’s real decline for an opportunity.
Skip question three, and you’ll end up holding a stock that’s cheap for good reason and stays that way for years.
A stock that clears all three is not a guaranteed winner; nothing on the market is. But the case for it is not built on hope or headlines; it’s built on a real gap between what the market is charging and what the business is worth, with a reason for that gap to close within a timeframe.
About Post Author
