How To Pick The Best Nigerian Stocks As Economy Enters Disinflation Phase

How To Pick The Best Nigerian Stocks As Economy Enters Disinflation Phase

As Nigeria’s economy cools and the stock market rallies, investors are re-evaluating where real value lies in 2025.

After two years of high inflation and tight monetary conditions, the country has entered a disinflationary phase, offering new opportunities across equities and fixed income.

According to recent data, the Central Bank of Nigeria (CBN) has begun easing its Monetary Policy Rate (MPR) — a move that signals the start of lower interest rates and declining fixed-income yields.

For investors, this shift means a gradual rotation away from high-yield government securities and back toward equities, where earnings growth and attractive valuations are re-emerging.

Banking Recapitalization Boosts Market Liquidity

The ongoing bank recapitalization exercise is reshaping Nigeria’s investment landscape. Nigerian banks are expected to inject over ₦4 trillion into the financial system, improving capital buffers and boosting overall market liquidity.

This recapitalization drive is strengthening investor confidence, deepening the financial system, and setting the stage for a more robust Nigerian capital market.

Additionally, the planned insurance sector recapitalization and relative stability in the foreign exchange (FX) markethave further brightened the investment outlook.

The moderation in FX volatility has significantly reduced foreign exchange losses that had previously affected the profit margins of consumer goods, industrial, and ICT firms between 2023 and 2024.

As a result, many listed companies are now reporting stronger earnings, improved margins, and better profit visibility.

Nigerian Equities Surge Amid Renewed Confidence

Investor optimism is clearly reflected in the Nigerian Exchange (NGX) performance.
As of October 14, 2025, the All-Share Index (ASI) has surged 43.6% year-to-date, with market capitalization reaching ₦93.77 trillion — one of the strongest showings in Africa’s equity markets.

Yet, as valuations rise, the key question remains: how can investors identify the best Nigerian stocks to buy in 2025?

Step 1: Prioritize Liquidity

Liquidity remains a critical factor in stock selection. It determines how easily investors can buy or sell shares without major price fluctuations or execution delays.

Experts recommend focusing on stocks with an average monthly trading volume of at least 20 million sharessustained for three months.

Highly liquid stocks on the NGX include FCMB, Universal Insurance, Linkage Assurance, Fidelity Bank, Access Holdings, AIICO Insurance, Zenith Bank, and UBA — each recording over 500 million shares traded monthly in the past quarter.

Liquidity ensures flexibility, stability, and faster exit opportunities in volatile markets.

Step 2: Define Your Investment Objective

Before picking any stock, investors must clearly define their investment goal — growth, income, or value.

Growth Investors

For those seeking growth, focus on companies with consistent profit expansion and resilience through Nigeria’s economic cycles — from inflation spikes to FX volatility.

An ideal benchmark is a compound annual growth rate (CAGR) of at least 30% in profits over the past five years.

• Banking sector: Nigerian banks have achieved an average five-year profit CAGR of around 63%, with Wema Bank surpassing 100% annual growth.
• Agricultural sector: Firms like Okomu Oil and Presco Plc have averaged over 64% annual profit growth, combining stability with steady trading liquidity.

Income Investors

If your goal is steady income, target companies with a proven dividend track record and consistent cash flows.

Examples include Seplat Energy, Okomu Oil, Presco, Dangote Cement, Aradel, and BUA Foods. These firms combine predictable dividend payouts with stable earnings.

High dividend yields and banking sector stocks also attract income-seeking investors due to their blend of liquidity and income reliability.

Value Investors

Value investing in Nigeria’s stock market means finding undervalued stocks trading below their intrinsic worth.

Investors should look for low price-to-earnings (P/E) ratios, strong fundamentals, and sustainable profit growth.

Even companies with higher multiples can represent value if earnings are expanding rapidly.

For instance, BUA Foods trades at 28x earnings, which may seem high, but with a 70% CAGR in profit growth and strong dividends, it still offers substantial value.

Top Nigerian Stocks to Watch in 2025

Combining the principles of liquidity, growth, income, and value, several Nigerian stocks currently stand out:

• Banking: FCMB, Zenith Bank, GTCO, UBA, Access Holdings, Fidelity Bank — all highly liquid with consistent earnings and dividends.
• Agriculture: Okomu Oil, Presco Plc — strong profit growth, decent liquidity, and solid fundamentals.
• Industrial & Energy: Seplat Energy, BUA Foods, Dangote Cement — robust earnings, stable dividends, and resilient business models.

Final Thoughts

Navigating the Nigerian stock market in 2025 requires balancing liquidity, growth, and value.

As the CBN’s monetary easing boosts market liquidity and confidence, equities are expected to remain attractive — especially for investors who focus on fundamentally strong, well-traded, dividend-paying companies.

Whether you’re a growth seeker, income earner, or value investor, Nigeria’s evolving capital market offers diverse opportunities for long-term wealth creation.

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