CBN Policy Watch · Fixed Income · FX · Fund Categories
Report Date 19 March 2026
Data as of Jan–Mar 2026
Source: CBN · NBS · SEC Nigeria
01 — Executive Summary
KEY TAKEAWAY 01
Inflation trajectory is decisively downward. CPI fell from a 34.8% peak in Jun 2025 to 24.48% in Jan 2026 — a 10.3pp drop in seven months — giving the CBN clear room to begin an easing cycle in H1 2026.
KEY TAKEAWAY 02
Money market funds are delivering exceptional real yields. At ~86% annualised vs 24.48% CPI, real yield is approximately +61pp — the strongest positive carry environment in recent memory for naira-denominated cash instruments.
KEY TAKEAWAY 03
Dollar fund holders are experiencing relative losses. NGN has appreciated ~12% from 2025 highs of ₦1,800/USD to the ₦1,550–1,600 range. Dollar fund YTD of 3.61% is being eclipsed by naira-denominated alternatives.
KEY TAKEAWAY 04
Equities and ETFs are the standout performers. Equity funds at 38.04% YTD and ETFs at 48.16% YTD reflect a broad risk-on re-rating as currency stability returns and rate-cut expectations build.
KEY TAKEAWAY 05
Bond funds are positioned to benefit most from CBN cuts. A 50–100bps MPR reduction in H1 2026 would trigger duration-driven price appreciation in FGN bond portfolios, potentially lifting bond fund returns materially above current 9.90% YTD.
Dashed amber line = CPI inflation. All yields nominal, Jan–Mar 2026. Curve broadly normal/steep from T-bill to 10yr bond.
CPI Inflation Trajectory — Jun 2025 → Jan 2026
NBS CPI data. Trend is clearly disinflationary, supporting a CBN rate-cut cycle in 2026.
Money Market Real Yield (Annualised vs CPI)
+61pp
86% ann. yield − 24.48% CPI = +61.5pp real return
Money market funds (average 16.55% YTD over 10 weeks) translate to ~86% annualised. With CPI at 24.48%, real purchasing power is being preserved and expanded materially. This is among the most favourable real rate environments for naira savers in Nigeria's recent history — driven by the CBN's aggressive tightening cycle.
04 — Fund Category vs Rate Environment
Fund Category
YTD 2026
Ann. Equiv.
vs CPI (24.48%)
Rate Sensitivity
Cut Impact
Positioning
Money Market T-bills, CP, bank deposits
16.55% 10-week YTD
~86%
+61pp real
Medium
Yield compression ahead as MPR cuts filter through to T-bill auctions
Neutral — Enjoy now, rotate on cuts
Bond Funds FGN bonds, sub-national
9.90%
~51% ann.
+27pp real
High (Duration)
Strong price appreciation on rate cuts. Duration risk works in holder's favour
Overweight — Best positioned for 2026
Dollar / USD Funds USD-denominated assets
3.61%
~19% ann.
−5.5pp real (vs USD CPI ~3%)
FX Dependent
NGN appreciation eroding USD returns for naira investors. Hold only as hedge
YTD figures from Rategyde database (Mar 6, 2026). Annualised figures for Money Market based on 10-week run-rate. Ann. equiv. for other categories shown for context only — actual returns are year-to-date 2026.
NGN holds ₦1,500 or stronger; oil stays above $80/bbl
Bond funds rally strongly — 10yr yields compress to 18–19%
Equity markets surge on lower discount rates and FPI inflows
MM funds see rapid yield compression; rotate to duration
Dollar fund holders experience further relative underperformance
Base Case
Prob: 55%
26.50–27.00%
−50 to −100bps cuts by Jun 2026
CPI declines gradually toward 22–23% range by mid-2026
CBN cuts 25–50bps at MPC meetings in Mar and May 2026
T-bill yields drift toward 16–17%; bond yields to 20–21%
Bond funds benefit moderately from price appreciation
Equities continue grinding higher on stable macro backdrop
NGN broadly stable; dollar funds remain laggards
Bear Case
Prob: 20%
27.50–28.00%
On hold or hawkish re-acceleration
Oil shock below $65/bbl triggers NGN depreciation and re-inflation
CPI re-accelerates above 28%; CBN forced to hike or hold firmly
Bond fund NAVs fall; duration exposure becomes a liability
Equity market corrects as risk premium rises
MM funds maintain high yields but real returns compress if CPI rises
Dollar funds re-emerge as a defensive hedge on NGN weakness
06 — Investment Implications
Money Market Funds
Lock in while rates are high
With T-bills at 18–19% and MM funds annualising at ~86%, current conditions offer exceptional naira-denominated carry. However, the rate-cut trajectory means yields will compress in H2 2026. Investors should maximise deployment now and watch for rotation signals.
Tactically Attractive — Time-Sensitive
Bond Funds
The primary rate-cut beneficiary
FGN bonds at 21–22% with an easing cycle ahead creates a classic duration trade. As yields fall, existing bond prices rise — particularly for longer-dated instruments. Bond funds are best positioned to capture capital gains over the next 12 months.
Strategic Overweight
Dollar / USD Funds
FX headwinds dominate
NGN appreciation from ₦1,800 to ₦1,550–1,600 creates a structural drag for naira investors in dollar funds. Only meaningful naira depreciation or a significant shift in the rate differential would restore competitiveness. Useful as a tail-risk hedge, not a core holding.
Underweight — Hedge Only
Equity Funds & ETFs
Bull cycle in progress
38–48% YTD returns reflect a re-rating of Nigerian equities as macro stability returns. Lower rates reduce cost of capital, improve corporate earnings outlook, and attract foreign portfolio investors. The equity bull case remains intact through 2026 assuming oil and NGN hold.
Overweight — Momentum Intact
Key Risks to Watch
Monitor these triggers
Oil price below $65/bbl, food inflation re-acceleration due to adverse weather or supply shocks, external debt service pressure, and global risk-off reducing EM appetite for Nigeria are the primary downside scenarios that could reverse the positive macro trajectory.
Risk Management Required
Portfolio Construction
Barbell: MM + Bonds/Equity
A barbell approach — maximising current MM carry while building duration via bond funds and capturing equity beta — appears optimal for H1 2026. As cuts materialise, tilt progressively toward duration (bonds) and growth (equity/ETFs) and reduce pure MM exposure.