Where to invest in May 2026: Five stocks analysts are watching closely

It is the fifth month of the year, and if you have been following our previous episodes, you would have noticed shifts in asset allocations as macroeconomic conditions continue to evolve.

The month of May presents another opportunity to start or rebalance your portfolio.

While the macro environment changes, some core investment principles remain constant:

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• Your investment must generate returns; otherwise, it ceases to be an investment.
• Returns should exceed inflation to preserve purchasing power.
• Risk must be assessed, with higher risk demanding higher returns.
• However, investors must remain cautious about how much they are paying for that risk.

These principles apply regardless of your investment goals or risk tolerance.

Asset classes in focus

Investors typically consider multiple asset classes: equities, fixed income, real estate, mutual funds, and alternatives.

However, recent performance suggests that equities have delivered the strongest returns, driven by strong earnings, good valuation, and macro tailwinds.

**Equities: A strong rally **

The Nigerian equities market has posted a remarkable rally in 2026. The All-Share Index (ASI) gained 20.36% in April, pushing year-to-date returns to 55.69%, already surpassing the 51% recorded in 2025.

Market capitalization has risen to about N156 trillion, driven by large-cap stocks such as MTN Nigeria, BUA Cement, Dangote Cement, and Aradel, each adding over N5 trillion so far this year.

Sector performance has been equally strong:

• Oil & Gas surged, supported by Aradel (N5.9 trillion gain) and Seplat (N3.34 trillion), pushing the sector index up 128% YtD.
• Industrial goods rose 99%, led by cement giants, adding over N17 trillion in value.
• Banking stocks also rallied, with Zenith, GTCO, Stanbic IBTC, and Ecobank each gaining over N1 trillion, contributing to a 51% YtD increase.
• Even low-cap stocks have performed very well. Zichis Agro Allied, with a market cap of about N26 billion, delivered over 1,000% share price growth.

Market activity remains dominated by domestic investors. Total transactions stood at N4.1 trillion as of March, with N3.6 trillion from local investors.

• Institutional participation rose significantly to N2.15 trillion, while retail investors contributed N1.45 trillion, indicating improving market depth.

Fixed income:

The fixed income market continues to benefit from strong liquidity. The OMO stop rate is around 22%, while Treasury bill yields range between 15% and 17%, broadly in line with inflation at 15.38%.

• Corporate issuers are also active, with commercial paper yields between 18% and 24%, offering attractive income opportunities.

However, while yields remain compelling, the upside is relatively limited compared to equities.

**What is driving the market? **

Market performance in 2026 has been shaped largely by macro factors, particularly the Israel–Iran conflict, which began on February 28.

The resulting rise in crude oil prices has:

• Boosted strong investor sentiment in the upstream oil companies like Seplat, Aradel, and Oando, driving share price gains
• Improved outlook for banks exposed to oil and gas lending through potential loan recoveries
• At the same time, rising energy costs have pressured consumer goods, industrial companies, and some banks, increasing input costs, operational expenses and potentially compressing margins.

**Where to invest **

Nigerian equities remain one of the most attractive asset classes for investors. As inflation is expected to rise further, equities provide a clear path to inflation-beating returns.

By April, over 70 stocks delivered returns above the 15.38% inflation rate, and more than 60 stocks still exceeded an assumed 25% inflation rate, even without dividends with banking and industrial sectors dominating this category.

That said, we recommend focusing on stocks with strong fundamentals and good liquidity, avoiding those in overbought territory

**Performance of prior calls **

In January, we recommended investing N1.5 million in banking stocks, specifically in Zenith Bank, Wema Bank, GTCO, UBA, and FirstHoldco. Except for FirstHoldco, the other stocks had gains between 6% to 16%.

Since then, performance has strengthened, with Zenith, GTCO, Access, Stanbic, Wema Bank, and ETI delivering returns above 25%.

The Oil and Gas sector

In 2025, the sector index posted a negative return of -1.54%, ended January with 13.8% gain and now 128% gain in April.

In January, we recommended allocating up to N1 million across Seplat Energy and Aradel Holdings.

• Aradel Holdings traded at N780 in January, up 16.45% at the time. Fast forward to April, the stock has surged over 202%, closing at N2,024 per share.
• Seplat Energy closed January at N6,700 (up 15% then), and has since rallied to N11,495, delivering a 98% YtD return.

Agriculture:

In the agriculture sector, while Zichis Agro Allied leads in terms of share price valuation with an impressive 1,000% gain, Okomu Oil and Presco are well-established, mature companies with strong market presence and solid fundamentals.

Both Okomu Oil and Presco have shown remarkable growth, with share price increases from 10% in January to over 50% year-to-date (YtD) by the end of April 2026

Selected Stocks (Diversified allocation):

We also recommended exposure to MTN Nigeria, BUA Foods, and Dangote Cement, alongside Academy Press, Custodian Investment, and NEM Insurance.

MTN Nigeria has emerged as the most capitalized stock at about N19 trillion, with a 79% YtD gain, rising from N572 to N915. Despite the rally, it remains attractive given its earnings strength and market dominance.

**Top five stocks to watch in May 2026 **

Based on current trends, these five stocks are on analysts’ watchlists, although the list is not exhaustive.

• MTN Nigeria (MTNN): Strong earnings growth and market leadership. Although it appears expensive, but it has strong upside potential
• Zenith Bank: The most profitable listed bank on the NGX with strong growth potential.  Its strong dividend payout makes it attractive, especially for income-oriented investors.
• **GTCO: **Consistent profitability and strong dividend payout record. Its relative strength index at 60 is not overbought yet. Return on equity of 28% is reasonable.  Analysts estimate that the stock offers a strong upside potential of about 72% from its current price of N135 per shar
• Aradel Holdings: High-growth upstream performer
• AIICO has been one of the best-performing insurance stocks in recent years. In 2025, it was the 3rd best-performing insurance stock, with a YtD gain of 165% following a 78% gain in 2024. From N0.55 in 2021 to current N4.31, the insurer’s stock has significantly outperformed its long-term average price of N1.2.

Also, the relative strength index (RSI), which measures the speed and changes of price movements at 58.40, is in a near-neutral position, indicating that the stock is neither overbought nor oversold—an indication of a favourable entry point.

These stocks span key sectors, telecoms, banking, energy, and agriculture offering a mix of growth, income, and resilience.

Overall, in May, focus more on stocks, stick to strong companies, and avoid buying stocks that have already risen too much

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