Nigeria’s economy is starting to cool off after months of stubbornly high prices.
Inflation dropped to 18.02 per cent in September 2025, down from about 24 per cent in January.
That’s good news for consumers, but it also means the “easy money” era for investors is fading.
Recent data show that returns on Treasury bills and government bonds are beginning to fall, with short-term bills now yielding between 16.6% and 17.5% while longer bonds hover around 16%.
Even CBN’s TB auction of October 22, which was oversubscribed by over N100 billion, saw rates settling between 15.3% and 16.1%, translating to true yields of about 15.9 to 19.25%.
At first glance, those figures may look attractive. But when you compare them to the current inflation rate of 18.02%, the real gain is very slim and, in some cases, even negative after accounting for fees and taxes.
In simple terms, many people are investing in T-bills and bonds that barely keep up with rising prices.
This is why it is important to look toward Collective Investment Schemes (CIS), better known as mutual funds.
These are managed by professionals who pool money from different investors and invest across stocks, bonds, money market instruments, and even foreign assets.
In a time when interest rates are softening, mutual funds provide a smarter way to diversify your portfolio, balance risks, and still earn returns above fixed income yield.
What exactly are mutual funds?
Think of a mutual fund (officially called a Collective Investment Scheme or CIS) as a big pot of money that comes from many people who want to invest but may not have the time or expertise to do it themselves.
A licensed fund manager takes that pot and invests it in different assets, stocks, bonds, treasury bills, or even foreign-currency investments depending on the fund’s goal.
Everyone who contributes owns a piece of the pot, and that piece is measured in units.
- The price of each unit is called the Net Asset Value (NAV), and it changes as the value of the underlying investments goes up or down.
- So, if the fund portfolio performs well, the NAV rises, meaning your investment grows too.
- If the market dips, the NAV may drop slightly, but because mutual funds spread money across several investments, the risk is shared and often much lower than buying a single stock or bond on your own.
Mutual funds come in different types:
- Money-Market Funds: Invest in short-term government securities and treasury bills; safer but with smaller returns.
- Bond Funds: Focus on longer-term government or corporate bonds; steadier returns but sensitive to interest-rate changes.
- Equity Funds: Invest mostly in company shares; riskier but offer higher long-term growth potential.
- Balanced or Hybrid Funds: Mix of stocks and bonds, offering a middle ground between growth and safety.
- Eurobond or Dollar Funds: Invest in foreign-currency assets, helping protect against naira depreciation.
The big advantage is access and convenience. You can start small, some funds accept as little as N5,000 or N10,000, and your money is professionally managed and regularly monitored.
You don’t have to track every market move or read dozens of company reports; the fund manager does that for you.
In short, mutual funds allow everyday investors to enjoy the same diversification and market access that big institutional investors have but without the stress of managing everything on their own.
However, not all mutual funds deliver the same kind of return. Some pay more because they take on more risks.
This follows a simple investment rule known as the risk–return trade-off, the higher the risk, the higher the potential reward.
So before investing, it’s important to think about your risk appetite (how much risk you can handle) and your expectations (how much growth you want). Those two factors should guide the kind of fund you choose.
To make this clearer, let’s look at how different funds are actually performing.
The Funds to consider
According to SEC data as of October 17, 2025, some mutual funds are delivering returns that comfortably beat treasury bills, bonds, and even Nigeria’s current inflation rate of 18.02%. Here’s how they stack up:
Equity Mutual Funds:
Equity mutual funds are leading the pack, with some earning over 50% so far this year.
They offer the highest growth potential but also come up with higher risk since they invest mainly in company shares.
Best suited for long-term investors who can handle market ups and downs.
Funds to Watch
- Halo Asset Management Limited
- Guaranty Trust Fund Managers Limited
- Zrost Investment Management Limited
- Chapel Hill Denham Management Limited
- Stanbic IBTC Asset Management Limited
Balanced Funds
Balanced funds will give you a mix of growth and stability by investing in both stocks and bonds.
They achieved an average YTD return of about 33%, making them a smart choice for those seeking steady growth without too much risk.
Funds to Watch
- Coral Balanced Fund – FSDH Asset Management Ltd
- Balanced Strategy Fund – Zenith Asset Management Ltd
- Stanbic IBTC Balanced Fund – Stanbic IBTC Asset Management Ltd
Exchange-Traded Funds (ETFs)
ETFs can be bought and sold directly on the stock exchange, giving investors instant diversification across sectors.
They’ve posted an average return of about 45% this year, reflecting the strength of the broader market.
ETFs to Watch
- Lotus Halal ETF – Lotus Capital Limited
- VCG ETF – Vetiva Fund Managers Limited
- New Gold ETF – New Gold Managers (Proprietary) Ltd
ETFs combine the flexibility of stocks with the diversification of mutual funds. In short: ETFs make investing simple. You can buy them through any stockbroker, hold them long-term, and enjoy the market’s growth without the stress of picking individual stocks.
Money Market Mutual Funds – Safe and Steady
Money market funds remain the safest and most stable option.
They invest mainly in treasury bills, commercial papers, and other short-term government securities, offering protection for your capital while earning modest returns.
As of October 17, 2025, money market funds recorded an average YTD return of 18.08%, roughly matching inflation — making them ideal for short-term goals or emergency savings.
Funds to watch
- AIICO Money Market Fund – AIICO Capital Ltd
- ARM Money Market Fund – ARM Investment Managers Ltd
- CardinalStone Money Market Fund – CardinalStone Asset Management Ltd
- Stanbic IBTC Money Market Fund – Stanbic IBTC Asset Management Ltd
Money market funds are the safest place to invest right now — steady, low-risk, and reliable for preserving your money.
The bottom line
With inflation cooling and interest rates declining, investors need smarter strategies to protect and grow their money.
Mutual funds provide balance, giving ordinary investors access to professional management, diversification, and inflation-beating returns across multiple asset classes.
In short:
- Go for Equity Funds if you want long-term growth and to be able to handle risks.
- Choose Balanced Funds for steady, moderate growth.
- Pick Money Market or Bond Funds for capital safety.
- Consider Eurobond Funds for dollar protection.
