October 8, 2025/CSL Research
Yesterday, we published our fixed income and equities market report highlighting the outlook for both the fixed income and equity markets in Nigeria amidst an improving economic environment and policy support from the Central Bank of Nigeria. See (CSL Economics and Strategy report 07 Oct 2025_ Eyes on the horizon for the next market catalyst).
We note that inflation is expected to ease to around 17% by October, supported by the recent appreciation of the Naira and the fading impact of last year’s fuel price increases. With inflation softening, the CBN is expected to continue cutting interest rates, leading to lower yields on government securities. This means borrowing costs will fall, and investors who hold longer-term bonds are likely to see higher capital gains as yields decline further.
For fixed-income investors, we advise shifting focus towards medium- to long-term government bonds, especially those maturing between 2033 and 2035, as they are best positioned to benefit from this downward movement in yields. Pension funds and large domestic investors are expected to remain active buyers of government debt, while foreign investors may also return if Nigeria is re-admitted to the JP Morgan Emerging Market Bond Index.
Improved foreign reserves and a growing current account surplus have also strengthened confidence in Nigeria’s credit profile. Meanwhile, in the Eurobond market, Nigerian bonds have already delivered strong returns this year as global interest rates fall and confidence in the country’s macroeconomic reforms grows. We believe that continued global monetary easing, especially in the United States, will support further gains for Nigeria’s Eurobonds.
In the equity market, performance has been very strong, with the Nigerian Exchange posting about 39.5% gains so far this year and expected to close around 53.0% by year-end. Lower interest rates are encouraging investors to move money from bonds into equities, while corporate earnings remain resilient. The CBN’s more relaxed policy stance, including cuts to the benchmark rate and the cash reserve ratio, should improve
liquidity and credit availability, supporting sectors such as banking, consumer goods, industrials, and telecommunications.
Large-cap stocks with solid fundamentals and consistent dividends are expected to continue driving market performance. Although some short-term volatility is possible as investors take profits ahead of the planned increase in capital gains tax from 10% to 30% next year, the overall outlook remains upbeat. Nigerian equities are still relatively cheap compared to global peers, making the market attractive for both local and foreign investors looking for value.
Click here to download full report: CSL Nigeria Daily – 08 October 2025 – FInancial markets.pdf
