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Nigerian equities have overtaken South Korea’s to deliver the world’s highest dollar based returns this year, as souring sentiment toward artificial intelligence shares drags the Kospi into bear market territory.

The benchmark Nigerian Exchange All Share Index has returned 67% in dollar terms year to date, edging past the 66% gain posted by South Korea’s Kospi, according to data from the 92 global stock exchanges tracked by Bloomberg.

The Kospi’s reversal has been sharp. The index has fallen 22% since its June 19 peak, entering a technical bear market as investors reassess whether the AI driven rally can be sustained. The South Korean won has weakened 5% this year, making it one of Asia’s worst performing currencies.

Nigeria’s surge contrasts with the volatility in Asian tech markets. Local equities have been buoyed by a combination of macroeconomic reforms, improving foreign exchange liquidity, higher oil prices, and a gradual return of foreign portfolio interest. The naira has appreciated about 4% against the dollar since January, supported by tighter monetary policy, increased FX inflows and efforts to unify the exchange rate regime.

The government’s broader economic reform agenda, including fuel subsidy removal, FX market liberalisation, revenue mobilisation efforts and a shift toward inflation targeting, has helped improve investor sentiment. Capital market reforms are also underway, with regulators pushing for deeper liquidity, stronger disclosure rules and new listings to broaden market participation.

This week’s announcement that S&P Dow Jones Indices is considering upgrading Nigeria to frontier market status has added to the momentum, signalling growing confidence in market infrastructure and regulatory improvements.

Financial services firms have led the rally on the Lagos bourse, benefiting from higher interest rate margins, stronger balance sheets and renewed investor appetite. Fortis Global Insurance Plc has delivered one of the most dramatic moves, returning 1,400% in dollar terms.

Market analysts say Nigeria’s corporate landscape is also shifting. The potential listing of Dangote Petroleum Refinery and Petrochemicals FZE, operator of Africa’s largest crude processing facility, is seen as a major catalyst that could deepen market liquidity and attract new institutional investors.

Damilola Okeleye, a trader at Stonex Nigeria Financial Ltd., said Nigeria’s economic reforms and the refinery’s anticipated listing have been “a strong driving force to the gains seen year to date,” adding that investors are responding to structural changes rather than speculative themes.

Unlike the Kospi, Nigerian equities are not directly exposed to global AI sector volatility. The market’s gains have instead come from policy reforms, sector specific improvements, and a more stable FX environment, giving investors a different risk profile compared with tech heavy Asian markets.

With reforms continuing and global index providers reassessing Nigeria’s classification, analysts say the country’s capital markets may be entering a new phase of visibility, although they caution that sustained performance will depend on inflation trends, FX stability and the pace of fiscal consolidation.