Nigerian Stocks Outperform Inflation: What August 2025’s Drop Means for Equity Investors
Nigeria’s stock market is extending its winning streak, delivering returns well above the country’s cooling inflation rate. With August inflation easing to 20.13% from July’s 21.88%, the Nigerian Exchange All-Share Index (ASI) closed yesterday with a year-to-date gain of 38%, up from 36.1% in August. This marks the second consecutive year that equities are comfortably outpacing inflation, providing investors with robust positive real returns.
Lower inflation widens the gap between nominal and real returns, making equities more attractive relative to fixed-income instruments. In August 2025, 99 listed companies delivered year-to-date returns above the prevailing inflation rate, compared to just 65 firms beating inflation in 2024 when prices were running at 34.8%. This expanding pool of inflation-beating stocks signals a healthier investment climate and stronger investor confidence.
While the stock market is flourishing, fixed-income assets remain under pressure. The most recent Treasury Bill auction cleared at 15.35% for 90-day notes and 17.44% for 364-day bills, while the benchmark 10-year FGN bond yields 17.74%—all still below August’s inflation rate. As a result, fixed-income investors continue to face negative real returns, underscoring why equities are drawing fresh capital.
Declining inflation is also lifting consumer spending and corporate earnings. The Consumer Goods Index surged 91.3% by mid-September, up from 84% in August and just 40.46% a year earlier. Major players like BUA Foods, Nestlé, Nigerian Breweries and Dangote Sugar swung from combined losses in 2024 to a ₦289.8 billion profit in Q1 2025, reversing heavy foreign-exchange losses. This turnaround, coupled with stronger disposable incomes, points to sustained momentum across consumer-driven sectors.
Banks and other financial institutions are poised to benefit as easing inflation supports loan repayments and lowers impairment charges. If the Central Bank of Nigeria softens its hawkish stance at its September 22 Monetary Policy Committee meeting, funding costs could fall further, boosting credit demand. For investors, the message is clear: easing inflation is strengthening corporate fundamentals and real returns, keeping Nigerian stocks ahead of inflation and making equities the preferred asset class for the foreseeable future.
source: nairametrics