Nigeria's falling rates push investors to rethink fixed income vs equities
Nigeria's Central Bank sliced the Monetary Policy Rate by 350 basis points to 23%, sending Treasury bill yields lower. At the final regular auction before October, the 364-day bill cleared at 15.89%, down from 16.62% in September and 17.70% in July, yet bids exceeded N4 trillion-more than ten times the amount offered. OMO auctions showed similar demand, with N6.40 trillion in bids for about N4.69 trillion sold. Commercial paper activity also rose, with 23 firms seeking N446.1 billion across 43 series in Q3 2026.
These moves mean fixed-income returns remain attractive but are narrowing; investors who lock in now can secure today's rates, while those waiting may face lower yields. For predictable income, Treasury bills, FGN bonds or money-market funds still work, but returns will soften as the easing cycle continues. Investors seeking stronger growth may turn to equities-broker targets still imply over 50% upside for ETI and AIICO, with UBA, Access Holdings, GTCO, Zenith Bank, MTN Nigeria, BUA Cement, Aradel and Nigerian Breweries also on buy lists. Equity funds offer a hands-off option, with top funds posting YtD returns of 46-82% as of August.
Dollar assets can hedge against naira weakness, though the yield gap remains wide; a stronger naira makes foreign holdings more appealing as a country-risk hedge than for yield alone. With N10 million targeting roughly 30% annual returns, a blend of selected stocks or equity funds for growth, plus a core of fixed income for stability and some dollar exposure, may balance risk and reward.
Will you lock in today's fixed-income rates, shift more into equities for growth, or diversify with dollar assets to hedge currency and country risk?