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October opens with investors facing a different market from the one they saw at the beginning of September.
The Central Bank of Nigeria (CBN) has cut the Monetary Policy Rate by 350 basis points to 23%, Treasury bill yields have started falling, the naira ended September around N1,329.50/$, external reserves have climbed above $54 billion; while the Nigerian stock market has already delivered strong gains this year.
For investors, the question is no longer simply, “Where can I get the highest return?”
It is increasingly about where to position money as interest rates fall without taking more risk than necessary.
Someone looking for predictable income may still prefer a fixed income. An investor targeting stronger capital growth may need equities or equity funds, while dollar and alternative assets can provide diversification.
The right choice depends on the return being targeted, how long the money can stay invested, and how much volatility the investor can tolerate.
If you want predictable income, fixed income still matters
Fixed income has not suddenly become unattractive because the MPR has fallen to 23%, but the returns investors can lock in are already declining.
At the final regular Treasury bill auction before October, the 364-day bill cleared at 15.89%, down from 16.62% earlier in September and 17.70% in July. Investors still submitted more than N4 trillion in bids for the one-year bill, more than ten times the amount offered.
The same appetite was visible in the CBN’s OMO market. At the September 29 auction, investors submitted N6.40 trillion in bids, while the CBN sold about N4.69tn across three maturities. Stop rates ranged from 16.23% to 17.24%.
For an investor entering October, the message is simple: fixed income returns remain attractive, but the window for locking in the rates available earlier in the year is narrowing.
If rates continue falling, investors buying Treasury bills later may have to accept lower returns.
Those who can leave their money invested for longer may also consider FGN bonds. Apart from locking in income for several years, existing higher-coupon bonds could rise in market value if yields continue falling.
Commercial paper can pay more, but carries more risk
Investors willing to move beyond government securities can also consider commercial paper.
Twenty-three companies approached the commercial-paper market in Q3 2026, targeting a combined N446.1 billion across 43 series.
Commercial paper can offer better yields than some government securities because the investor is lending to a company rather than the Federal Government.
That extra return, however, comes with extra risk.
Investors should therefore look beyond the advertised yield and consider who is borrowing the money, what it will be used for, and how capable the company is of repaying.
What about money-market funds?
Money-market funds remain one of the easiest ways to earn fixed-income returns without personally buying Treasury bills or commercial paper.
But returns could gradually soften. Funds that bought securities when yields were higher will continue earning those rates until maturity. As those investments mature, managers may have to reinvest at lower yields if the easing cycle continues.
For investors who value liquidity and relatively low volatility, however, money-market funds can still be useful for money that may be needed at short notice.
Are stocks still worth considering?
For investors looking for returns well above the 15% to 17% currently available from fixed income, equities may have to do more of the work.
But after the strong rally recorded this year, selection matters more.
A late-September review of six brokerage houses still found value in several stocks. Broker targets implied more than 50% upside for ETI and AIICO, while UBA, Access Holdings, GTCO, Zenith Bank, MTN Nigeria, BUA Cement, Aradel and Nigerian Breweries also attracted multiple positive recommendations.
The attraction is not simply that these companies have performed well. Investors should be looking for businesses where earnings, dividends, and valuations still leave room for further gains.
Broker targets are not guaranteed returns, but they provide one way of identifying where analysts still believe value exists after the market’s strong run.
Equity funds offer another route
Not everyone wants to analyze individual companies. For such investors, equity mutual funds provide exposure to stocks while leaving selection to professional fund managers.
As of August, the top ten Nigerian equity mutual funds had generated YtD returns ranging from 46.64% to 82.36%, led by Zedcrest Equity Fund at 82.36%.
Several others, including Halo Equity Fund, Zrosk Magna Equity Fund, Futureview Equity Fund and Cowry Equity Fund, had also returned more than 50%.
Those returns should not be treated as guaranteed future performance. Equity funds can also fall when the market declines, so investors still need to consider the manager’s track record, portfolio, fees, and risk profile.
Should you hold dollars or invest abroad?
Dollar assets still have a place in a diversified portfolio, but the return gap with naira investments remains wide.
- At the end of September, Nigeria’s one-year Treasury bill was yielding about 15.89%, while recent OMO bills cleared around 16% to 17%.
- By comparison, US government bonds offered yields of around 5% in dollars, while Nigerian Eurobonds offered higher dollar yields depending on maturity and market price.
- For a Nigerian investor, the final return also depends on the exchange rate. Someone converting naira to dollars around N1,330/$ and earning 5% would still trail a 16% yield in naira unless the currency weakened significantly. If the naira later moved towards N1,500/$, the exchange-rate gain could narrow that gap.
With the naira stronger and reserves improving, foreign assets may therefore appeal more as a hedge against currency and country risk than purely for higher yield.
What about REITs and other alternative assets?
Real Estate Investment Trusts allow investors to gain exposure to property without buying a building directly.
- Nigeria’s five REITs have a combined market capitalisation of about $230m, making the market relatively small and sometimes less liquid.
- REITs could become more attractive if fixed-income yields continue falling, while infrastructure funds and other alternative investments can provide additional diversification.
However, these investments may be better suited to people who can leave their money invested for longer periods.
Where should an investor with N10 million put their money in October?
For an investor targeting about 30% over the next 12 months, fixed income alone is unlikely to get the job done.
- Treasury bills and OMO bills are still offering around 16% to 17%, so they can provide stability, but the stronger returns would have to come mainly from equities.
- One approach would be to put the largest part of the N10m into selected stocks and equity funds. Some broker targets still suggest more than 50% upside for ETI and AIICO, while UBA, Access Holdings, GTCO, Zenith, MTN Nigeria, BUA Cement, Aradel and Nigerian Breweries also remain on several broker buy lists.
- An investor who does not want to pick stocks directly could put part of that money into equity funds, several of which have already returned more than 40% this year.
- A smaller portion could then remain in Treasury bills, bonds or money-market funds to provide stability, while some dollar exposure can protect against another sharp weakening of the naira.
So, someone hoping to make roughly N3m on a N10m portfolio must understand that the 30% target comes with substantially more risk than simply earning 16% from government securities.
The objective should not be to chase 30% at all costs, but to build a portfolio where the potential return is worth the risk being taken.
