Fixed Income: Bullish Horizon Beckons As Analysts Project Yield Decline

The Nigerian equities market is poised for another bullish year in 2025, driven by favorable macroeconomic conditions and strategic corporate developments.

Analysts forecast robust growth, underpinned by anticipated stability in the foreign exchange (FX) market, declining inflation, and a strengthened banking sector.

Market optimism for 2025 hinges on three critical macroeconomic factors, according to analysts from Arthur Stevens Assets Management and Research.

The Managing Director and Chief Executive Officer, Mr. Olatunde Amolegbe, expressed strong optimism about impressive returns in equities compared to the fixed income market.

In his “Market Review of 2024 and Outlook For 2025”, the renowned investment expert and market operator listed the factors expected to drive the bullish market this year, urging investors to prioritise equities in their investment option.

He said: “First, foreign exchange (FX) market stability is expected to either hold steady or improve, with potential appreciation in exchange rates.

Such trends are projected to positively impact the equities market by enhancing investor confidence and reducing currencyrelated uncertainties.”

According to him, stabilised FX rates are likely to exert downward pressure on inflation, creating conducive environment for monetary policy adjustments.

“A decline in inflation could prompt the central bank to maintain or lower interest rates, further stimulating market activity,” Amolegbe projected.

Third, he pointed out that the ongoing recapitalisation of banks anticipated to be largely completed by 2025 ahead of March 2026 deadline, will fortify the banking sector.

This development is expected to enhance banks’ capacity to support economic growth, translating into positive outcomes for equity investors, especially, in major banking stocks.

Yields dropping

While analysts are bullish on equities investment, they are skeptical about fixed income instruments, projecting a fall by March this year.

The Chief Executive Officer of Nairametrics, Mr. Ugodre ObiChukwu, stated that from the month of March, interest rates were going to go down, stressing that investors would never get to see high interest rates again.

While presenting a review of this year’s macroeconomic outlook at a forum of the Finance Correspondents Association of Nigeria (FICAN) in Lagos, Obi-Chukwu explained that people who want to invest in treasury bills and fixed income securities, should do so between January and February.

“Because from March, interest rates are going to go down. So, if you have any loose money that you don’t really need immediately, if you have loose money like that, treasury bills, fixed income securities, January and February is probably the best time to do it, because you will not see that interest rate again,” the analyst stated.

Continuing, he said: “The last treasury bills came in at about 25 – 26 per cent. You’re not going to see those sort of numbers again. And, I can make bold to say you might not see that number in another five years.

You’ll not see this sort of juicy interest rate in another five years,” he emphasised. He pinned his optimism on projected decline in inflation rate and strengthening local currency, the naira, developments he said are likely to make the central bank to begin to lower interest rate. “

I think relatively prices will drop. So, we’re looking at inflation numbers at just borderline 29, 30 per cent by the end of the year. We’re currently at 34.7 per cent…

The good thing about this is that with inflation tapering and looking stable, I think that investments will be a lot better this year compared to the year before,” Obi-Chukwu concluded.

Market performance in perspective

The Nigerian Exchange (NGX) kicked off 2025 on a strong note, adding N1.06 trillion in market value in January, driven by new listings from FCMB Group Plc and LASACO Assurance Plc.

The All-Share Index (ASI) closed at 104,496.12 points, recording a 1.53 per cent year-to-date (YTD) gain, while overall market capitalization rose 1.67 per cent to N64.71 trillion.

Analysts at Lagos-based Cowry Asset Limited attributed it investor confidence buoyed by strong corporate earnings reports, raising expectations for attractive dividend payouts.

As in previous year, bargainhunting intensified with low cap stocks posting fantastic gains in just one month into the year.

Leading the gainers’ chart was Chellarams Plc, which soared 60.4 per cent, followed by Vitafoam Plc (+31.5%), Beta Glass Plc (+21%), and NNFM (+21%). In terms of sectoral performance, the consumer goods sector led the rally, rising 4.01 per cent on the back of gains in Vitafoam, NNFM, Nigerian Breweries, and Nestlé.

The banking index climbed 2.54 per cent, while the Commodity Index and Oil & Gas Index gained 1.78 per cent and 0.97 per cent, respectively. On the downside, the insurance

2025 promises to be a dynamic year for the Nigerian equities market, marked by macroeconomic stability, sectoral growth, and strategic corporate developments

sector declined due to losses in Veritas Kapital, Linkage Assurance, and Guinea Insurance, while the industrial sector was weighed down by Dangote Cement, Cutix, and John Holt.

Analysts at Cowry Asset Limited expect the bullish momentum to continue as more companies release corporate earnings and announce dividend payments, and advised investors to focus on fundamentally strong stocks and leverage market volatility to buy low and sell high.

Last year, the equity market closed 2024 on an exceptional note, as the benchmark All-Share Index (ASI) surged by an impressive 37.6 per cent year-on-year, marking the third-highest annual gain for the Nigerian Exchange (NGX) over the past five years, surpassed only by the extraordinary 50 per cent rally during the COVID-driven boom of 2020 and the robust gains of 2023.

Notably, the ASI shattered records by crossing the unprecedented 100,000-point mark for the first time in January 2024, signaling the market’s remarkable resilience and growth trajectory.

The key catalysts behind the market sustained ascent since 2020 reflected deep-seated investor confidence, fueled by robust domestic participation and recent strategic policy reforms that signaled dramatic rise in foreign portfolio investments (FPIs), which climbed from a modest four per cent in mid-2023—prior to the advent of Nigeria’s new administration—to an impressive 16 per cent by November 2024.

This surge underscores renewed international faith in Nigeria’s economic outlook, despite divergent opinions at the grassroots level.

Liquidity dynamics

Market liquidity flourished throughout last year with a steady flow of capital highlighting genuine, sustained investor interest, predominantly driven by local retail and institutional players.

Their growing influence has fostered market stability, reducing Nigeria’s historical dependency on volatile foreign capital. Analysts have viewed this as a major breakthrough signal for the Nigerian equities market.

Unlike previous periods dominated by foreign investors—often marked by sharp market swings due to rapid capital flight—2024 showcased a more resilient and less volatile market structure.

This evolution reflects the foundational strength provided by a robust domestic investor base, which serves as a buffer against external shocks.

Anticipated market listings

Key listings are expected to shape the market landscape in 2025. The potential debut of Nigerian Petroleum Corporation (NPC) and Dangote Refinery on the Nigerian Exchange (NGX) are expected to attract significant investor interest and inject fresh capital into the market.

These listings are anticipated to bolster market depth and diversify investment opportunities.

New Telegraph had reported that in 2024, the NGX welcomed several high-profile listings that enriched its investment landscape.

Notable among these were BUA Foods, Aradel—boasting a market capitalization approaching ₦5 trillion—alongside Transcorp Power and Geregu.

These additions have significantly broadened market depth and diversified investment opportunities potential investors can explore.

Analysts project more vibrant market cycles reminiscent of the surge of trading activities in previous year buoyed by intense interest in heavyweight stocks such as Transcorp, UBA, and Access Corp.

Sectoral performance

Banking: A bullish outlook driven by strengthened capital bases and improved economic participation. Oil and Gas: Stable to positive growth expected, supported by regulatory reforms and resilient global oil prices.

Industrial: The potential listing of Dangote Refinery is a key growth catalyst, enhancing sector visibility and investor appeal. Telecommunications: Mixed performance projected.

While tariff adjustments may boost revenues, FX dependencies could pose challenges. Agriculture: Positive prospects fueled by increased government investments, improved security, and strong export potential amidst favorable global commodity prices.

Consumer Goods: Companies like Unilever are benefiting from effective backward integration, reducing FX exposure and improving profitability. Corporate developments to watch Strategic corporate moves will continue to influence market dynamics.

Banks are expected to finalise recapitalisation efforts, enhancing sector resilience. Additionally, companies like Airtel, VFD Group, and Presco are poised for significant corporate actions, including share buybacks, restructurings, and cross-border acquisitions.

Conclusion

In conclusion, 2025 promises to be a dynamic year for the Nigerian equities market, marked by macroeconomic stability, sectoral growth, and strategic corporate developments.

Investors can look forward to a bullish market environment, with opportunities across diverse sectors reflecting Nigeria’s evolving economic landscape.

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