The Central Bank of Nigeria’s (CBN) decision to hold its benchmark interest rate at 27.5 percent for the third consecutive time this year has left investors reevaluating their strategies amid high borrowing costs and a tightening credit environment.
With the Monetary Policy Committee (MPC) choosing to pause further rate hikes, market watchers say this signals a cautious stance as the apex bank balances inflation control with economic stability.
Here are five investment strategies experts recommend for navigating the current environment:
1. Lock in Long-Term Treasury Bills and Commercial Papers
With rates trending downward, investors may benefit from locking funds they won’t need immediately into long-tenor treasury bills (270–360 days), commercial papers (CPs), or high-yield savings accounts. These instruments provide protection against further yield declines and offer relatively more stable returns.
2. Diversify Fixed-Income Exposure
As yields on fixed-income instruments decline, a diversified approach is critical. Fixed-income mutual funds, which previously offered returns in the 26–29 percent range, now yield closer to 20–21 percent.
Analysts suggest investors spread their holdings across treasury bills, corporate bonds, and government securities to minimise risk while capturing modest returns.
3. Allocate to Eurobonds for Currency Hedge
Analysts at Meristem recommend allocating up to 25 percent of portfolios to Eurobonds, especially for investors concerned about naira depreciation and inflation.
Eurobonds offer dollar-denominated returns, which can help protect against currency volatility. This strategy also provides diversification and a hedge against local macroeconomic risks.
4. Increase Exposure to Equities
Declining fixed-income yields have historically made equities more attractive. CSL Stockbrokers forecast a positive outlook for the equity market as investors seek higher returns.
Sectors such as banking, industrials, and consumer goods—especially companies with strong fundamentals and dividend histories—are likely to benefit from lower borrowing costs and increased investor inflows.
5. Manage Liquidity with Short-Term Instruments
To stay liquid while still earning reasonable returns, some analysts advise allocating up to 15 percent of a portfolio to short-term commercial papers and treasury bills.
These instruments offer flexibility and are ideal for meeting short-term obligations while still taking advantage of relatively higher short-term yields.
The CBN’s decision to pause rate hikes presents both challenges and opportunities. While borrowing remains expensive, investors who adopt a balanced, diversified strategy—spanning local and foreign-denominated instruments—can still earn attractive returns and preserve capital.
Whether through long-term treasuries, Eurobonds, or dividend-yielding stocks, the key is to stay flexible, data-driven, and forward-looking as the monetary landscape evolves.
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