Nigeria’s stock market has been pulling off something remarkable lately—it’s not just keeping up with inflation, it’s beating it. For investors who’ve been watching price levels climb relentlessly over the past two years, the latest inflation figures must feel like a breath of fresh air. In August 2025, inflation slowed to 20.13%, while the All-Share Index (ASI) powered ahead with a 36.1% year-to-date gain, climbing further to 38% by yesterday’s close.
But here’s the kicker: when inflation slows, real returns expand. That’s the story behind the numbers. And if you’re wondering what that really means for equities, let’s break it down.
1. Real Returns Are Finally Widening
When inflation drops, investors don’t just gain on paper—they gain in reality. As of August, 99 listed stocks had delivered returns above July’s inflation of 21.88%. With inflation sliding further, that number only expanded. Compare this with 2024, when just 65 companies managed to outpace the 34.8% inflation rate.
In simple terms, more investors are now walking away with actual purchasing power gains, not just nominal increases that get eaten up by rising prices.
2. Fixed Income Still Lags Behind
Here’s the thing—equities are shining, but not every asset class can say the same. Treasury bills are still clearing between 15.35% and 17.44%, and the 10-year FGN January 2026 bond yields around 17.74%. With inflation still over 20%, those returns remain negative in real terms.
So while bonds and bills may look safer on paper, equities are currently the ones offering shelter from inflation erosion. For conservative investors, that’s a bit of a dilemma: do you stick with low-risk, negative real returns or take on equities where the upside looks brighter?
3. Consumer Spending Power Is Making a Comeback
Declining inflation isn’t just an abstract number—it trickles down to wallets. When everyday Nigerians spend less on basics, they have more left for discretionary goods. That’s music to the ears of listed companies.
Take the Consumer Goods Index. By August 2025, it was up 91.3%, compared to just 40.46% a year earlier. Brands like Nestlé, Nigerian Breweries, Dangote Sugar, and BUA Foods swung from combined losses of nearly N418 billion in Q1 2024 to profits of N289.8 billion in Q1 2025. FX stability also played a part, but easing inflation gave consumers the breathing room to spend more, which fueled this rebound.
4. Banks Are Breathing Easier Too
The banking sector is another clear winner. Lower inflation translates to stronger corporate and household cash flows. That means fewer loan defaults, reduced impairment charges, and healthier balance sheets.
If disinflation continues, the Central Bank of Nigeria (CBN) might eventually soften its hawkish stance. Lower policy rates could bring down banks’ funding costs and even stimulate more borrowing—further improving profitability. For investors, this suggests banking stocks might still have room to run.
5. Dividends Could See a Boost
Let’s be honest—many Nigerian investors love dividends as much as capital gains. And with company profits bouncing back, dividend payouts are likely to rise. This matters for two reasons:
- It improves total shareholder returns.
- It attracts new investors who prefer steady income streams.
The broader implication? Stronger dividend yields could keep the equity rally going, especially if inflation continues its downward path.
6. The MPC’s Next Move Is Critical
Now, here’s a curveball. The Monetary Policy Committee (MPC) meets again on September 22, 2025. While analysts expect the Monetary Policy Rate (MPR) to hold at 27.5%, the language of the committee could shift market sentiment.
If the MPC sounds confident about sustaining disinflation, it’ll reinforce investor optimism. But if they hint at dovishness, equities might get an extra push. Either way, the meeting will be a temperature check for the market’s next leg.
7. Equities Remain the Lead Story
So what’s the big picture? Nigerian stocks are not just staying ahead of inflation—they’re comfortably outpacing it. The ASI’s 38% YtD gain is proof that easing inflation is fueling both confidence and profitability.
Of course, risks remain. If inflation were to spike again due to currency pressure or global shocks, the rosy outlook could dim. But for now, equities look like the strongest horse in the race, especially in consumer goods, banking, insurance, and industrials.
Final Thoughts
The easing inflation story is about more than percentages—it’s about confidence, purchasing power, and opportunity. For professionals, executives, or even retail investors trying to protect wealth, equities are offering something rare in Nigeria’s high-inflation history: consistent, positive real returns.
Sure, nothing in markets is ever guaranteed. But if inflation keeps sliding, investors could be looking at one of the most favorable windows for Nigerian equities in years. You know what? It’s not just about beating inflation. It’s about making your money actually work harder than the economy’s headwinds.
