NGX lost N13 trillion in June: How to separate bargains from traps

The Nigerian equity market shed over N13 trillion in a single month in June 2026, with most stocks on the exchange closing the month lower than they started. For anyone holding shares or thinking about buying, the question now is not whether stocks fell — almost everything did — but which falls are opportunities and which are warnings.

Correction, bear market, or crisis territory?

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 has shifted. Beyond that, once declines approach 40%, some analysts consider the market to be in crisis territory, though that describes severity rather than a strict 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. That is exactly the environment where the difference between a genuine bargain and a falling knife matters most.

Three questions to screen stocks

In a broad selloff, good businesses and struggling ones get sold off together by the same panicked sentiment. The market does not pause to ask which is which. At Nairametrics, when we screen the NGX for stocks worth a second look, we ask three questions in order. A stock must answer all three before it earns a place.

1. Has the price actually fallen and by how much? The starting point is how far a stock is 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 is deliberately conservative, so a stock must show a real, meaningful pullback. Anything closer, say 90% or 95% of its high, has not really pulled back. This step tells you which stocks have room between where they are and where they have 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, they look identical. 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.

Cheap or just cheap-looking?

2. Is it cheap, or does it just look cheap? This step separates a genuine bargain from a trap, and it is 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 is 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 is what P/E, or 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 years. Jaiz Bank is a good illustration. 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. That is 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. 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.

What could change in the next six months?

3. Is there something specific that could change this in the next six months? This is 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 include the ongoing FTSE Russell review of Nigeria's market status, which affects how much foreign passive capital flows into Nigerian stocks.

For Nigerian investors, the key takeaway is clear. A falling market does not mean every stock is a bargain. The ones that pass all three screens — a real pullback, genuine cheapness on earnings, and a catalyst on the horizon — are the ones worth watching.