Nigeria’s capital market regulators are reassessing rules on free float—the proportion of a company’s shares available for public trading—in a move to improve liquidity, strengthen the equity market, and attract more local and foreign investors.

Many of Nigeria's largest companies have tightly held shares, limiting the portion available for public trading. While current regulations set minimum requirements, some major firms still maintain very low free-float percentages.

The review was partly prompted by global index providers, like MSCI, tightening their free-float definitions—a move that has impacted passive investment flows in markets with scarce public shares.

The review comes as many of the country’s largest publicly traded companies remain tightly held by founders or dominant shareholders, leaving only a small fraction of shares in circulation. A limited free float can reduce trading activity and make stock prices more vulnerable to sharp swings, as even relatively small trades can move the market.

Under current rules, large companies listed on the Nigerian Exchange Group must either have at least 20% of their shares available to the public or maintain a minimum of 40 billion naira ($29 million) worth of shares in public hands. While several major firms technically meet the requirement, their free-float percentages remain relatively small, according to Bloomberg.

The issue gained fresh attention earlier this year when MSCI Inc., a major global index provider, tightened its definition of free float. The change triggered selloffs by passive investment funds in markets where publicly tradable shares are scarce. This development has prompted regulators in several countries to reassess their market structures to ensure they remain attractive to international investors.

According to Temi Popoola, chief executive officer of the Nigerian Exchange Group, the exchange is working closely with the Securities and Exchange Commission of Nigeria to evaluate how free-float rules can better support market growth. The review includes examining whether current thresholds remain appropriate, improving the accuracy of free-float data captured by the exchange, and exploring ways to encourage companies with tightly held share structures to release more stock to the public.

Some of Nigeria’s largest companies illustrate the issue. Dangote Cement, the country’s biggest listed firm, has a free float of roughly 11%, while BUA Cement, another major industrial company, has less than 3% of its shares available for trading. Both firms still comply with existing regulations because the value of their publicly traded shares exceeds the 40 billion naira threshold.

Analysts say increasing free-float levels could make Nigeria’s market more appealing to institutional investors. Higher levels of tradable shares generally improve liquidity, making it easier for investors to buy or sell positions without significantly moving prices.

Regulators are also considering broader structural changes, including adjusting how stock market indexes are calculated. Currently, many indices rely heavily on overall market capitalisation. Incorporating free-float considerations more prominently could provide a clearer picture of how investable certain stocks truly are.

Benchmark providers such as FTSE Russell and MSCI already factor free float into their methodologies. Since global funds often track these indexes, increasing the availability of tradable shares could ultimately improve Nigeria’s chances of attracting larger flows of international investment.

The Nigerian Exchange has recorded steady growth in recent months, with Nigeria’s stock market emerging as Africa’s best-performing equity market in 2026 amid rising valuations.

The exchange currently hosts 156 listed companies—fewer than the Egyptian Exchange with 245 firms and the Johannesburg Stock Exchange with 204—and has a market capitalisation of about $33 billion, according to the OECD Africa Markets Report 2025. The rally has been supported by a stronger naira, which has improved dollar-denominated returns for investors, alongside improving liquidity and rising foreign portfolio inflows that have boosted sentiment across key sectors.