Analysts at Afrinvest Research have reaffirmed their positive outlook for the Nigerian equities market in the second half of 2025, maintaining a full-year projection of 30.4 per cent gains under their base-case scenario.
The investment firm’s half-year market review and second-half outlook highlight the critical role of exchange rate stability and inflation moderation in shaping both equity performance and fixed-income yields in the months ahead.
Despite a subdued first quarter, marked by investor rotation into high-yielding fixed-income assets, the market regained momentum in Q2 on the back of strong corporate earnings, improved macroeconomic indicators, and renewed investor confidence.
The Nigerian Exchange (NGX) All-Share Index (ASI) posted a 16.6 per cent gain as of June 30, 2025, making up for the Q1 slump and reaffirming Nigeria’s positioning as one of Africa’s top-performing equity markets.
Afrinvest attributed the expected positive performance in equities to a combination of factors, including sustained capital-raising activities in the banking sector, a projected moderation in fixed-income yields, accelerating capital expenditure (CAPEX) by the government, fiscal reforms, and improved foreign exchange (FX) market conditions.
The potential listing of major corporations on the NGX is also expected to spur additional investor interest and market liquidity.
“In line with our prognosis at the beginning of the year, market dynamics remain largely favourable, and we maintain our 30.4 per cent return outlook for 2024,” Afrinvest stated.
On the fixed-income front, the market operated under a delicate balance of cautious monetary policy, stubborn inflationary pressures, and evolving fiscal conditions during H1:2025.
Although the Central Bank of Nigeria (CBN) held the Monetary Policy Rate (MPR) steady at 27.5 per cent, its stance remained hawkish due to sticky inflation—rebased but still elevated—and intermittent FX volatility.
The government raised ₦16.1tn in gross domestic borrowings, with the bulk sourced from NT-Bills (₦8.5tn) and Open Market Operations (OMO) instruments (₦4.8tn).
Conversely, bond issuance declined significantly to ₦2.9tn—half of the amount raised in the same period last year—due to growing investor aversion to duration risk.
This front-loaded borrowing has nonetheless left a substantial funding gap. Afrinvest estimates a net domestic borrowing of ₦3.4tn in H1, leaving a projected ₦13.8tn shortfall for H2 to meet the ₦17.2tn financing requirement under its revised budget deficit forecast—well above the official ₦14.1tn figure.
Looking forward, Afrinvest projects benchmark yields to range between 19.5 per cent and 22.5 per cent in H2:2025, driven by anticipated inflation easing, cautious monetary recalibration, and increased borrowing.
The firm also expects the current yield curve inversion to gradually flatten by Q4 as investor appetite for longer-dated instruments returns, contingent on sustained FX stability and further disinflation.
However, Afrinvest cautioned that significant risks remain, including potential FX underperformance, a congested borrowing calendar, and external financing constraints. These could compel more aggressive debt issuance and keep market volatility elevated.
“The interplay between inflation trends, FX market performance, and the government’s funding strategy will be critical to yield direction and investor sentiment in the coming months,” Afrinvest concluded.
With investor focus increasingly shifting toward macroeconomic stability and fiscal execution, market participants are likely to monitor policy signals and corporate performance closely as the second half unfolds.
