CBN Rate Hold Spurs Four Smart Investment Strategies: Experts Advise on Fixed Income, Equities, and Eurobonds

The Central Bank of Nigeria (CBN) has decided to maintain its benchmark interest rate at 27.5 percent, a move anticipated by many in the financial sector. This decision, marking the third consecutive hold this year, reflects the apex bank’s cautious approach to monetary tightening. While the hold is expected to sustain high borrowing costs and tight credit conditions, it has left investors seeking clarity on where to allocate funds amid this complex environment.

Market reactions were relatively muted, suggesting the outcome was already priced in. The Nigerian equity market saw a marginal rise of less than one percent, while fixed-income yields, especially for treasury bills, continued a downward trend. At the recent auction, the one-year T-bill yield declined to 18.86% from 19.47%. This reinforces the broader trend of easing yields, which some investors view as an opportunity to reposition portfolios for longer-term gains.

Investment professionals like Ayodeji Ebo of Optimus by Afrinvest are advising investors to lock in long-term instruments such as 270–360-day treasury bills, good-rated commercial papers (CPs), and high-yield savings accounts (HYSA) to hedge against further rate declines. These instruments are considered safe bets that offer more predictable returns and protect against interest rate volatility. Investors who bought into 20–21% FGN bonds earlier are already benefitting and can continue holding for stable returns.

In addition, analysts from Meristem suggest a diversified approach. Their mid-year outlook proposes allocating a portion of the portfolio to Eurobonds to hedge against naira depreciation and inflation, along with FGN and corporate bonds for their higher real return. For liquidity management, they recommend moderate exposure to CPs and short-term treasury bills. This balanced strategy is aimed at optimizing return while managing currency and credit risk.

With falling fixed income returns, analysts expect more investor activity in the equities market. CSL Stockbrokers noted that as yields soften, equities become more attractive, especially for investors seeking capital appreciation. The current financial landscape, shaped by steady CBN rates and easing bond yields, thus presents a range of repositioning strategies for Nigerian investors looking to balance risk, return, and liquidity in the months ahead.

Source: Business day