Nigeria’s domestic bond yields are expected to fall further as inflation slows and the Central Bank of Nigeria (CBN) maintains an accommodative policy stance, according to CSL Stockbrokers’ latest outlook.

CSL projects that the monetary easing cycle—supported by a possible 100 bps rate cut at the November MPC meeting—will keep downward pressure on yields through early 2026. The firm said the trend reflects a faster slowdown in inflation, currency stability, and improving macro fundamentals.

Inflation is projected to ease to around 17% in October from 20.12% in August, supported by favourable base effects from last year’s fuel price increases and a stronger naira. CSL said such an outturn would strengthen the case for another policy-rate reduction, reinforcing the CBN’s dovish bias.

“For fixed income investors, the evolving market dynamics carry clear strategic implications. With nominal yields projected to trend lower in the near term, driven by expectations of further monetary policy easing and moderating inflation, we see limited incentives to remain concentrated in short-term securities,” CSL writes.

“As such, we continue to favour exposures to the mid-to-long segment of the sovereign curve, which stands to benefit more from capital gains as yields compress further. Taking into consideration the anticipated shift in market conditions over the next couple of months, we recommend accumulating positions in the [2033 and 2035 sovereign issues], which offers the most attractive price return potential.”

In the Eurobond market, Nigerian debt has rallied this year, supported by policy reforms, stronger reserves, and a broader emerging-market recovery. Nigeria’s current account surplus rose to $5.3bn in Q2 2025 from $2.9bn in Q1, while a $1.1bn Eurobond maturity due in November is expected to be comfortably met. CSL said anticipated global rate cuts—especially from the US Federal Reserve—could boost portfolio inflows and support further yield moderation.

Equities have also benefited from the monetary shift. The Nigerian Exchange (NGX) has gained 39.5% year to date, and CSL forecasts full-year gains of about 53%, driven by resilient earnings, lower yields, and institutional buying. Pension funds, which currently hold around 25% equity exposure versus a 30% ceiling, could increase allocations in coming months, providing additional market support.

“We expect large-cap stocks with strong fundamentals and consistent dividend payouts to drive market performance over the next six to twelve months. Furthermore, a potential catalyst for additional upside in the equity market lies in the portfolio positioning of PFAs [Pension Fund Administrators],” CSL writes.

“Historically, PFAs have maintained a conservative stance, with allocations to equities remaining below the regulatory ceiling. As of August, PFA’s exposure to equities stood at approximately 24.7% and 22.0% for Fund I and Fund II, respectively, compared to the maximum permissible limits of 30% and 25%. As such, we see room for PFAs to increase equity exposure, providing an additional source of demand and sustained market support in the months ahead.”

CSL said Nigerian equities remain undervalued, trading at a P/E multiple of 7.9× against a five-year average of 10.7× and below global benchmarks. The firm warned that short-term volatility could emerge as investors take profits ahead of the planned increase in the capital-gains tax rate from 10% to 30% in 2026 but expects any correction to be temporary given improving fundamentals.