Markets
Fixed Income vs Equities: Where Nigerian Investors Are Rotating in H2 2025 — Yields, Liquidity, Risk
With headline inflation easing to 21.88% (July) and the MPR held at 27.5%, investors are running a barbell: parking cash in short NTBs for carry while keeping selective exposure to financials on the NGX for dividends and upside.
Macro snapshot
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Inflation: Headline slowed to 21.88% in July 2025 (fourth straight monthly decline). Food inflation rose to 22.74%.
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Policy rate: CBN has kept the MPR at 27.5% in recent meetings to support disinflation.
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Equities YTD: NGX ASI +40.61% as of Aug 13, 2025.
What the curve says (mid-Aug ‘25)
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NTBs (primary/secondary): The Aug 6 auction cleared the 364-day at 16.50% discount (~19.75% yield); secondary benchmarks printed ~16–17% (90–349d) around Aug 8.
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FGN bonds (DMO July auction): Re-opens cleared at 15.69% (5-yr) and 15.90% (7-yr).
Read: Bills and mid-tenor bonds still deliver negative real returns vs 21.88% CPI today, but bills provide attractive nominal carry with lower duration risk. Equities have outperformed in nominal terms, but with higher volatility.
Quick scorecard (indicative)
| Asset | Latest datapoint | Takeaway |
|---|---|---|
| 91–349d NTBs | ~16–17% (secondary benchmarks, Aug 8) | Cash-like carry while you wait for clearer CPI/MPC signals. |
| 364d NTB | ~19.75% yield (Aug 6 auction) | Popular “parking spot” for portfolios rotating out of rich equities. |
| 5–7y FGN | 15.7–15.9% marginal rates (July auction) | Duration bid likely only if disinflation accelerates or MPC pivots. |
| NGX ASI | +40.61% YTD (Aug 13) | Still constructive; rotation toward banks/insurers on earnings/dividends. |
Where money is rotating (H2 map)
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Short bills laddering: Investors are building laddered NTB portfolios (e.g., 91/182/364d) to harvest carry and reinvest at frequent intervals as CPI trends clarify.
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Selective equities: Preference for financials (banks/insurers) with stronger earnings momentum and cash dividends; more caution on richly valued consumer names after the YTD run.
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Cautious on duration: 5–7y FGN looks less compelling than bills until there’s a firmer view that inflation keeps falling and the MPC is nearing a pivot.
Key risks to watch
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Inflation path: Continued easing lifts real returns on fixed income and could spark a duration bid; a stall keeps portfolios bill-heavy.
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MPC guidance: Any shift from the 27.5% MPR will ripple across bills, the belly of the curve, and bank multiples on the NGX.
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Earnings/dividends: Bank and insurance seasonality will steer equity sentiment into Q4.
House view (actionable framing)
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Now: Run a barbell — short NTBs for carry + quality financials for dividends and upside optionality.
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When to add duration: If CPI keeps trending lower and guidance hints at rate cuts, rotate part of bills into 5–10y FGN to lock yields.
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When to de-risk equities: If inflation plateaus or FX/liquidity tighten, lean back into NTBs/OMO until transmission improves.