•Nigeria projected to outperform African peers
By Chukwuma Umeorah
CardinalStone Research’s 2025 Mid-Year Economic Outlook has projected that Nigeria’s equities market will surge by 32 per cent in 2025, driven mainly by corporate tax relief, improving foreign exchange conditions and easing inflation.
The report attributes the bullish forecast to a combination of government-led reforms and macroeconomic adjustments that are beginning to ease operational pressures for businesses. A key policy change is the reduction of Corporate Income Tax (CIT) from 30 per cent to 25 per cent, as provided in Nigeria’s recently signed tax legislation.
“The reduction of CIT from 30.0 per cent to 25.0 per cent bodes well for business profitability and supports higher dividend payments,” the report noted, adding that exemptions on VAT for key inputs and transport could further reduce production and distribution costs across multiple sectors.
CardinalStone used the Grinold-Kroner model to estimate the market’s 2025 return, combining dividend yield, inflation expectations, projected earnings growth, and price-to-earnings reversion. It concluded that the Nigerian market could achieve a 32.2 per cent total return, with a risk-adjusted return of 14.5 per cent and an expected return-per-risk ratio of 1.82 times. These figures, the firm said, place Nigerian equities ahead of comparable African markets on a risk-adjusted basis.
The outlook also highlighted broader improvements in Nigeria’s economic indicators. Real GDP is expected to grow by 4.1 per cent in 2025, higher than the 3.4 per cent growth recorded in 2024. Inflation is projected to moderate to 20.0 per cent from last year’s average of 33.0 per cent, supported by a more stable exchange rate and declining energy costs. It adds that a potential cut in the monetary policy rate by between 50 and 100 basis points is likely in the second half of the year, which would reduce borrowing costs and enhance investor appetite for equities.
CardinalStone also pointed to renewed interest from foreign portfolio investors as a critical catalyst for the equities market. Foreign inflows reached $8.05 billion in the first half of 2025, nearly equaling the full-year total of 2024. “We expect this renewed momentum in FPI activities to continue, supported by Nigeria’s relatively strong macro narrative and favourable positioning in the current global environment,” the report said.
In terms of sector-specific outlooks, the report sees strong earnings prospects in upstream oil and gas firms, fast-moving consumer goods companies, banks, and telecom operators. SEPLAT and ARADEL were highlighted as top picks in the oil sector, with earnings expected to benefit from recent acquisitions and the activities of the RAEC consortium. In the banking sector, GTCO, Zenith Bank, and UBA were identified as fundamentally strong institutions with clean balance sheets and high capital buffers.
While commending the performance of Nigerian banks in 2025, CardinalStone expects that even though some banks may face short-term constraints on payouts due to new regulatory capital requirements, long-term prospects remain solid, especially with recapitalisation expected to strengthen risk-taking capacity.
The consumer goods sector is also positioned for recovery, following two years of elevated input costs. A more stable naira is expected to ease the FX-related pressures that have weighed on margins. Companies such as Nestlé, Nigerian Breweries, Unilever, and UACN have all made strategic investments in their distribution networks and introduced lower-priced product variants that are gaining market acceptance.
The telecommunications industry was forecasted to benefit from recently approved tariff increases and renegotiated infrastructure contracts, which should help operators like MTNN and Airtel Africa restore margins after extended periods of cost pressure. The report added that MTN Group was considering a public offer to reduce its stake in MTNN once the latter returns to a positive equity position and resumes dividend payments, a move that could deepen local investor participation.
“The improved macro narrative, along with sector-specific catalysts and stronger earnings visibility, makes a compelling case for increased equity exposure in 2025,” the report stated.