Where to Invest ₦1 Million in Q4 2025: Equities Lead as Inflation Eases and Rates Fall

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As Nigeria enters the final quarter of 2025, investors holding about ₦1 million face a more strategic landscape than earlier in the year — one defined by easing inflation, steady interest rate adjustments, and improving investor sentiment.

With headline inflation slowing to 20.12% as of August 2025, the key challenge for investors remains achieving real returns — returns that not only preserve capital but also outpace inflation.

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The Investment Framework: Time, Risk, and Inflation

Regardless of market conditions, the fundamentals of investing remain consistent:

• Time Value of Money: ₦1 today is worth more than ₦1 tomorrow.

• Risk Premium: Investors should be compensated for taking risks beyond risk-free instruments.

• Inflation Risk: Real returns must surpass inflation to maintain purchasing power.

A sound investment, therefore, should reward time, compensate for risk, and outperform inflation — while aligning with one’s age, risk appetite, and financial goals.

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Economic Backdrop: Stability Amid Transition

Nigeria is currently in a disinflationary phase, supported by a relatively stable foreign exchange market and improving macroeconomic stability.

Meanwhile, external economies have started to cut interest rates, signaling a potential easing cycle that could flow into local monetary policy.

Domestically, key policy shifts — including ongoing banking and insurance recapitalization, and the Central Bank of Nigeria’s plan to take over the fixed-income settlement platform from FMDQ — are likely to influence asset performance in Q4 2025.

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Equities: Strongest Path to Inflation-Beating Returns

Following the CBN’s rate cut from 27.5% to 27% in September, equities appear to be the primary beneficiaries of this easing environment.

Lower policy rates often reduce yields on fixed-income securities, pushing investors toward stocks for better real returns.

For context, Nigerian Treasury Bills currently yield around:

• 91-day tenor: 15%

• 182-day tenor: 15.30%

• 364-day tenor: 16.78%

—all still below inflation, keeping real returns in negative territory.

Conversely, the Nigerian Exchange (NGX) continues to show resilience, with over 99 listed stocks delivering year-to-date gains above inflation.

Lower borrowing costs are also expected to ease financing pressures on corporates, particularly in the consumer goods, industrial, ICT, and conglomerate sectors — potentially driving further upside in stock prices.

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Where to Look: High-Potential Equity Plays

Consumer Goods

After a challenging 2024, the consumer goods sector has rebounded sharply in 2025.
Out of 20 component stocks, only one remains a laggard.

• Honeywell Flour Mills: Up 258% YtD, yet still trading 40% below its 52-week high.

• Northern Nigeria Flour Mills: Also trades 30% below its peak, signaling further upside potential.

Dividend-Paying Stocks

Investors seeking stability and income should prioritize dividend-paying equities, such as:
Seplat Energy, Okomu Oil, Presco, Skye Shelter Fund, Dangote Cement, and Airtel Africa.

For example, Okomu Oil recently declared an interim dividend of ₦30 per share, meaning an investor holding 10,000 shares would earn ₦300,000 in interim dividends alone.

Liquidity Consideration

Liquidity remains essential for flexibility and exit planning. Banking stocks, with their high trading volumes and large free float, remain attractive for investors needing easy market entry and exit.

They also maintain steady dividend payouts, making them suitable for income-oriented portfolios.

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Fixed Income: Capital Preservation and Predictability

For conservative investors, Treasury Bills, FGN Bonds, and Savings Bonds remain reliable for capital preservation and steady income — though real returns remain negative.

Retail investors may need to access these via secondary markets or fixed-income mutual funds, given that primary issue thresholds often exceed ₦1 million.

Commercial Papers (CPs)

Corporate commercial papers currently yield around 22% (paid upfront), allowing for reinvestment and compounding.

However, accessibility remains a barrier for small investors unless approached through money market funds or broker-managed portfolios.

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Alternative Assets: Diversification and Inflation Hedge

With limited access to some fixed-income instruments, alternative assets offer inflation protection and diversification opportunities.

Top options include:

• Gold: Up over 50% year-to-date, reinforcing its status as an inflation hedge.

• REITs (Real Estate Investment Trusts): Offer property exposure without high capital requirements.

• ETFs, Commodities, and Crypto Assets: Provide diversification, though with higher volatility.

The key is balancing risk-adjusted returns — not merely chasing the highest nominal yields.

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Recommended Q4 2025 Portfolio Allocation for ₦1 Million

Asset Class	Allocation	Objective
Equities	60%	Growth and dividend income
Fixed Income (Funds)	25%	Stability and liquidity
Alternative Assets	15%	Inflation hedge and diversification

This blend balances growth potential, income generation, and capital protection, ensuring your ₦1 million remains productive amid Nigeria’s evolving investment landscape.

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Key Takeaways

• Inflation down to 20.12%, creating room for real return opportunities.

• CBN’s rate cut to 27% supports equity market growth.

• Dividend-paying and liquid stocks are best suited for income and flexibility.

• Fixed income offers safety but limited access for small investors.

• Gold and REITs remain solid inflation hedges.