Fixed Income vs Equities in Nigeria: Which Actually Beats Inflation?
Treasury bills yielded 19–21% while the NGX returned 51% in 2025, but inflation complicates the picture. A data-driven comparison of Nigerian asset classes and their real returns.
The Safety Question
In 2025, a 364-day treasury bill offered roughly 19–21% annually. The NGX All-Share Index returned 51.19%. But inflation — depending on how you measure it — was somewhere between 15% and 35%. The question of which asset class actually grew purchasing power is less straightforward than it appears.
Nigerian investors face a version of this dilemma every year, but 2025 made it especially sharp. Equities had their best year since 2007. Fixed income yields were elevated by tight monetary policy. And the National Bureau of Statistics rebased the Consumer Price Index, fundamentally changing how inflation is measured. The result is that two investors looking at the same data can reach opposite conclusions about whether their money grew in real terms.
This article lays out the numbers across five asset classes, calculates real returns under both inflation methodologies, and works through a ₦10 million allocation example. The data tells an interesting story — though not a simple one.
The Contenders
Before diving into each asset class, here is the landscape at a glance.
| Instrument | Typical 2025 Yield/Return | Risk Level | Liquidity | Minimum Investment | Tax Treatment |
|---|---|---|---|---|---|
| 364-day T-bills | 19–22% | Very low | High (secondary market) | ₦50,000 (auction) | 10% WHT on interest (from Oct 2025) |
| FGN Bonds | ~16.5% (10Y yield) | Low | Moderate (NGX-listed) | ₦5,000 (Savings Bond) | Tax-exempt for individuals |
| Money Market Funds | 18.7–24.3% | Low | High (daily redemption) | ₦5,000–₦10,000 | Subject to WHT on distributions |
| Bank Fixed Deposits | 10–15% (retail) | Very low | Low (locked tenor) | Varies by bank | 10% WHT on interest |
| NGX Equities (ASI) | 51.19% | High | Variable (stock-dependent) | Price of one share | CGT (30% above dual threshold) + 10% WHT on dividends |
Each of these instruments serves a different purpose in a portfolio. The question is what happens when you adjust for inflation.
Treasury Bills
The 364-day treasury bill is the anchor of Nigeria's fixed income market. It is the most liquid government instrument, backed by the full faith and credit of the Federal Government.
The Central Bank of Nigeria conducts regular auctions, and 2025 saw elevated rates driven by tight monetary policy. Heading into 2025, the 364-day stop rate had peaked at approximately 21.76% in July 2024 before easing to around 19.19% by September 2024. Through much of 2025, rates remained in the 19–21% band.
An important tax change took effect in late 2025. Under the Withholding Tax Regulations 2024 and the Nigeria Tax Act 2025, interest income from treasury bills now attracts a 10% withholding tax at source, effective October 28, 2025. Previously, T-bill income was fully exempt for individual investors. A 20% T-bill yield now translates to approximately 18% after WHT — still attractive, but the tax advantage that T-bills once held over bank deposits has narrowed. FGN bonds, by contrast, remain fully tax-exempt for individuals.
The trade-off is straightforward: T-bills offer near-certainty of nominal return and high liquidity, but the yield is capped and now subject to WHT. In a year where equities returned 51%, that cap is conspicuous.
FGN Bonds
Federal Government of Nigeria bonds offer longer tenors and semi-annual coupon payments. The 10-year benchmark yield stood at approximately 16.55% in February 2026, down 3.41 percentage points from a year earlier. That compression reflects a combination of monetary policy signalling and increased demand for government paper.
For retail investors, the FGN Savings Bond programme is the most accessible entry point. It offers tenors of 2–3 years, quarterly coupon payments, and a minimum investment of just ₦5,000 (maximum ₦50 million). Unlike standard FGN bonds, which trade on the secondary market via the NGX, Savings Bonds are held to maturity and redeemed at par.
Standard FGN bonds can be traded on the NGX secondary market, which provides liquidity — though spreads can be wider than in the T-bill market. Under Section 163(1)(n) of the Nigeria Tax Act 2025, interest income from FGN bonds remains fully tax-exempt for individual investors — a meaningful advantage over T-bills, which now attract 10% WHT.
The declining yield trend is worth noting. Investors who locked in higher rates in early 2025 are sitting on attractive coupons, but new money entering the bond market faces lower yields than were available twelve months ago.
Money Market Funds
For many Nigerian savers, money market funds have become the default alternative to bank savings accounts. SEC data from July 2025 showed money market funds commanding 45.6% market share of Nigeria's mutual fund industry — a reflection of their accessibility, daily liquidity, and competitive yields.
Performance in 2025 varied by fund but was broadly attractive:
| Fund | 2025 YTD Yield | AUM |
|---|---|---|
| Legacy Money Market Fund | 25.15% | — |
| ARM Money Market Fund | 21.97% | ₦221.1B |
| FBN Money Market Fund | 21.54% | ₦525.5B |
| Stanbic IBTC Money Market Fund | 20.08% | ₦1.5T |
The Stanbic IBTC Money Market Fund, the largest in the industry with over 192,000 unitholders and a net asset value exceeding ₦1.5 trillion, yielded 20.08%. Smaller funds like Legacy delivered higher returns, though with considerably smaller asset bases.
Most money market funds invest primarily in T-bills, commercial paper, and short-term bank deposits. Their yields therefore track the broader fixed income market, with the fund manager's skill (and fee structure) determining how closely they match or exceed T-bill rates.
The key advantage is accessibility: minimum investments as low as ₦5,000, daily liquidity in most cases, and no need to participate directly in CBN auctions. The trade-off is that distributions may be subject to withholding tax, unlike direct T-bill holdings.
Bank Fixed Deposits
Bank fixed deposits remain the default savings instrument for many Nigerians, but the data suggests this is largely a matter of habit rather than optimisation.
Retail depositors typically receive 10–15% on fixed deposits, with higher rates (15–20%) available for large deposits exceeding ₦10 million. Even at the upper end of that range, fixed deposits are uncompetitive with T-bills, FGN bonds, and most money market funds — all of which offer comparable or better yields with superior tax treatment or liquidity.
The Nigerian Deposit Insurance Corporation (NDIC) insures deposits up to ₦5 million per depositor per bank, which provides a safety net. But T-bills carry the full backing of the Federal Government, and the ₦5 million NDIC ceiling is modest relative to the sums under discussion.
Interest on fixed deposits is subject to 10% withholding tax, further eroding the after-tax return. A 12% fixed deposit yields approximately 10.8% after WHT — below what T-bills and FGN bonds offer, even after the new WHT on T-bills.
NGX Equities
The headline number is hard to ignore: the NGX All-Share Index returned 51.19% in 2025, reaching a record 155,613 points and pushing total market capitalisation to approximately ₦100 trillion. It was the best year for Nigerian equities since 2007.
But the headline obscures significant dispersion beneath it. Sector performance varied enormously:
| Sector | 2025 Return |
|---|---|
| Consumer Goods | +129.57% |
| NGX ASI (broad market) | +51.19% |
| Oil and Gas | -1.54% |
An investor concentrated in consumer goods stocks had a transformative year. An investor concentrated in oil and gas stocks effectively stood still. The ASI is an aggregate — it does not represent any individual investor's experience.
There are also tax implications that fixed income investors do not face. Under the 2025 Finance Act, equity disposals are subject to Capital Gains Tax at 30% when both thresholds are exceeded: ₦150 million in total proceeds over a 12-month rolling window and ₦10 million in net capital gains within a calendar year. Dividends are subject to a separate 10% withholding tax.
For most retail investors, the CGT thresholds provide effective shelter. But for active traders and high-net-worth portfolios, the 30% rate on gains above the threshold is material — and it is a cost that T-bill and bond investors simply do not bear.
The Comparison: Nominal and Real Returns
This is where the inflation question becomes unavoidable. And it requires a brief but important digression on methodology.
In 2025, the National Bureau of Statistics (NBS) rebased the Consumer Price Index, changing the base year from 2009 to 2024 and expanding the consumption basket from 740 to 960 items. Under the old methodology, headline inflation for December 2024 was 34.80%. Under the rebased methodology, inflation for December 2025 came in at 15.15%, with food inflation at 10.84%.
The drop is largely methodological. The NBS did not claim that prices stopped rising — the rebasing changed how price changes are measured, weighted, and reported. Both figures are official NBS data. Neither is "wrong." But they produce dramatically different pictures of real returns, as the following table demonstrates.
For a detailed explanation of how real returns are calculated and why this matters, see our guide on real returns after inflation.
| Asset Class | 2025 Nominal Return | Real Return (Rebased CPI ~15.15%) | Real Return (Old CPI ~34.80%) |
|---|---|---|---|
| 364-day T-bills (~18% after WHT) | ~18% | +2.5% | -12.5% |
| FGN Bonds (10Y) | ~16.5% | +1.2% | -13.6% |
| Money Market Funds (avg) | ~21% | +5.1% | -10.2% |
| Bank Fixed Deposits (avg, after WHT) | ~10.8% | -3.8% | -17.8% |
| NGX ASI | 51.19% | +31.3% | +12.2% |
Real returns are calculated using the Fisher equation: Real Return = ((1 + Nominal) / (1 + Inflation)) - 1.
Under the rebased CPI, most fixed income instruments delivered modest but positive real returns. Under the old methodology, every fixed income instrument lost purchasing power — only equities stayed ahead.
This is not a minor discrepancy. It is the difference between "T-bills preserved your wealth" and "T-bills lost you 11% in real terms." The inflation methodology you use fundamentally changes the investment narrative.
A ₦10 Million Allocation: Four Scenarios
To make these numbers concrete, consider four hypothetical approaches to investing ₦10,000,000 at the start of 2025.
| Strategy | Allocation | Year-End Nominal | Real Value (Rebased CPI) | Real Value (Old CPI) |
|---|---|---|---|---|
| All T-bills | 100% T-bills at ~18% after WHT | ₦11,800,000 | ₦10,248,000 | ₦8,753,000 |
| All equities | 100% NGX ASI at 51.19% | ₦15,119,000 | ₦13,131,000 | ₦11,216,000 |
| Conservative blend | 70% T-bills, 30% equities | ₦12,796,000 | ₦11,112,000 | ₦9,493,000 |
| Equal weight | 25% each: T-bills, FGN bonds, MMF, equities | ₦12,630,000 | ₦10,968,000 | ₦9,370,000 |
Note: the equal-weight scenario uses a blended FGN bond yield of approximately 15%, reflecting a mix of shorter-tenor Savings Bonds and mid-range instruments — lower than the 10-year benchmark yield of 16.5% cited earlier, which represents the long end of the curve.
Real values are calculated by dividing the nominal year-end value by (1 + inflation rate).
Several caveats apply. This is backward-looking analysis of a single year. 2025 was an exceptional equity year — the best since 2007. The NGX ASI return is a broad market proxy; individual stock selection produced outcomes ranging from +129% to -1.5%. Transaction costs and fund management fees are not reflected. The T-bill figure uses an approximate after-WHT rate; the 10% WHT took effect in October 2025, so the effective tax drag for the full year was lower than shown (most T-bill income earned before October was untaxed).
With those caveats firmly in place, the pattern is clear: equities dominated in 2025 regardless of which inflation measure you use. But the margin of outperformance changes substantially depending on methodology, and the all-T-bills strategy ranges from "modest real gain" to "significant real loss" depending on which CPI you reference.
What the Numbers Do Not Capture
Data tables are useful, but they flatten out dimensions that matter in practice.
Volatility
The NGX ASI's 51.19% annual return did not arrive in a straight line. Equities can — and do — drop 20–30% in a bad year. The ASI declined 6.2% in 2022. T-bills, by contrast, deliver their yield with near-zero volatility. An investor who needs certainty of outcome over a specific time horizon faces a fundamentally different decision than one who can absorb short-term drawdowns.
Liquidity
T-bills and money market funds offer near-instant liquidity. FGN bonds trade on the NGX secondary market, but spreads can be wider and execution less certain. Equities depend entirely on the specific stock — blue chips like Dangote Cement or GTCO trade with reasonable liquidity, but mid-cap and small-cap names can be illiquid, with wide bid-ask spreads and limited daily volume.
Tax Efficiency
FGN bond income remains fully tax-exempt for individuals under the Nigeria Tax Act 2025. T-bill interest, however, now attracts 10% WHT as of October 2025 — a change that narrows the gap between T-bills and bank deposits on an after-tax basis. Money market fund distributions may attract withholding tax. Bank deposit interest is taxed at 10%. Equity gains above the dual threshold are taxed at 30%, and dividends are taxed at 10%. For a detailed breakdown of the CGT regime, see our complete guide to Nigerian Capital Gains Tax.
The Rebasing Question
Every real return figure in this article depends on which inflation number you use. The NBS rebasing is methodologically defensible — updating a 15-year-old basket is standard practice — but it means that historical comparisons across the methodology change are inherently difficult. Investors should be transparent with themselves about which figure they reference and why.
Concentration Risk
The ASI is heavily weighted toward a small number of large-cap stocks. Broad market returns do not reflect the experience of investors concentrated in specific sectors or individual names. The gap between Consumer Goods (+129.57%) and Oil and Gas (-1.54%) in 2025 illustrates this vividly. For sector-level analysis, see our breakdown of NGX sector performance in 2025.
One Year Is Not a Trend
2025 was the best year for Nigerian equities since 2007. Using it as the basis for forward-looking asset allocation would be a mistake. The data from a single exceptional year is informative but not predictive.
How Journaira Helps
Journaira was built for exactly this kind of analysis — not at the abstract market level, but for your actual portfolio. The platform lets you toggle between nominal and inflation-adjusted returns on your equity holdings, using live NBS data. When the next CPI release changes the picture, your dashboard updates automatically.
For investors approaching or exceeding the CGT thresholds, Journaira tracks both the proceeds meter (₦150 million rolling window) and the gains meter (₦10 million calendar year) in real time. You can see exactly where you stand before making your next trade, rather than discovering a tax liability after the fact.
The performance analytics module shows whether your individual stock picks actually outperformed simpler alternatives — including the T-bill rate. If a year of active trading delivered less than a tax-exempt FGN bond, that is information worth having.
The Bottom Line
The data from 2025 tells a clear story in nominal terms: equities dominated, returning 51.19% against 18–21% for fixed income alternatives (after accounting for the new WHT on T-bills). In real terms, the picture depends heavily on which inflation methodology you use — but equities came out ahead under both.
That said, a single year is a snapshot, not a strategy. Fixed income instruments serve a purpose that a returns comparison alone cannot capture: capital preservation, predictable cash flows, and a floor beneath your portfolio in years when equities do not cooperate. The investor who held T-bills through 2022's equity decline slept better at night, even if 2025 made them wish they had been bolder.
The more useful takeaway is not "which asset class won in 2025" but "am I measuring my returns honestly?" If your portfolio tracker shows nominal gains without adjusting for inflation, you may be overestimating your progress. And if you are not tracking the tax implications of your equity trades, you may be underestimating your costs. Both blind spots are correctable.
This article is for educational purposes only and does not constitute financial advice. Investment decisions should be based on your individual circumstances, risk tolerance, and consultation with a qualified financial adviser. Past performance, whether nominal or inflation-adjusted, is not indicative of future results.
