Evaluating the Performance of Exchange-Traded Funds and Mutual Funds in the Nigerian Capital Market

Exchange-traded funds and mutual funds represent important collective investment vehicles for retail and institutional investors in Nigeria, yet comparative performance analysis across fund types and market cycles is absent from the domestic empirical literature. This study evaluates the performance of exchange-traded funds and open-end mutual funds listed and registered in Nigeria for the period 2014 to 2022. A fund-level panel dataset was constructed from the Securities and Exchange Commission registration data, fund annual reports, and the Nigerian Exchange Group price database. Fund performance was measured by absolute returns, Sharpe ratio, Treynor ratio, Jensen's alpha, and maximum drawdown. Risk factors were controlled using the Fama-French three-factor model adapted for the Nigerian capital market. Exchange-traded fund and mutual fund performance was compared across equity, fixed-income, and balanced fund categories and across three sub-periods corresponding to different market cycles. Results showed that equity mutual funds outperformed exchange-traded funds on a risk-adjusted basis during bull market phases (mean Jensen's alpha: 0.034 vs. 0.011, p < 0.05), while exchange-traded funds demonstrated superior capital preservation (lower maximum drawdown) during the 2020 bear market. Fixed-income funds consistently outperformed equity funds on a Sharpe ratio basis across all sub-periods. The study concludes that fund type selection should reflect investor risk tolerance and market cycle expectations, and recommends regulatory incentives to expand the universe of exchange-traded funds listed on the Nigerian Exchange Group. Keywords: exchange-traded funds, mutual funds, fund performance, Sharpe ratio, Nigerian capital market