As Nigeria rolls out sweeping foreign currency and economic reforms, it’s bringing investors back to the stock market.

The NGX All Share Index is approaching levels last seen in 2008 after President Bola Tinubu’s government scrapped costly fuel subsidies and devalued the naira. Banks have emerged as the biggest winners, with an index of shares soaring 23% last month, the most since 2018.

However, other companies haven’t been so lucky. Dangote Cement Plc sank 1.7% in June as the rising price of gasoline, which has almost tripled in the past month, pressures transportation and manufacturing.

So far, the stock-market gains have been largely been driven by local investors looking to protect their savings against searing inflation. Bank of America Corp. economists said the country will have to increase interest rates by at least 700 basis points before the end of the year to curb inflation that’s poised to accelerate to 30%.

In the longer run, there’s speculation that the reforms may eventually draw more international investors.

“People are positioning in banks ahead of the expected return of foreign portfolio investors, who will want to key in for the benefits,” said Segun Adams, an equity analyst at Lagos-based Afrivest West Africa Ltd. The government estimates the fuel subsidies were costing the state $10 billion a year.

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Nigerian banks stand to profit from their holdings of US dollars, which are now more valuable after the collapse in the naira. The currency has fallen almost 40% against the greenback since June 14, according to Lagos-based FMDQ.

“The devaluation will have a positive impact on bank balance sheets, with assets expected to inflate by as much as 15% on the exchange rate difference alone,” wrote Joshua Odebisi and Titilayo Lawani, analysts at RMB Nigeria Stockbrokers.

Some oil stocks have also gained on the back of the subsidy removal. TotalEnergies Marketing Nigeria Plc has almost doubled this year, while Seplat Energy Plc is up more than 20%.

Still, it will take some time before foreign investors are willing to wade back into Nigerian markets given the economic upheaval. They may take their cues from index provider MSCI Inc., which has been considering whether to remove Nigeria from its Frontier Market indexes and downgrade it to Standalone Market status.

“If you are a dollar investor, you will have to digest the naira weakness,” said Malcolm Dorson, portfolio manager at Global X Management. “You need to have a strong level of comfort with the government that these reforms will be sustained going forward.”

--With assistance from Sujata Rao.