As Nigeria’s economy cools and equities surge, investors face a new question: where to find value next.
After two years of high inflation and tight monetary policy, Nigeria’s economy is now in a disinflationary phase.
The Central Bank of Nigeria (CBN) has begun to ease the Monetary Policy Rate (MPR), triggering expectations of lower fixed-income yields.
For many investors, this signals a gradual shift away from high-yield government securities and back toward equities, where opportunities are emerging.
The ongoing bank recapitalization exercise is reshaping investor sentiment, with Nigerian banks expected to inject over N4 trillion into the financial system.
This move is not only strengthening the capital base of the banks but also boosting market liquidity and deepening investor confidence.
In addition, the planned recapitalization of the insurance sector and relative stability in the foreign exchange market have further brightened the outlook.
The moderation in FX volatility has reduced the foreign exchange losses that weighed heavily on the profits of consumer goods, industrial, and ICT companies between 2023 and 2024.
As a result, many listed firms are now reporting improved margins and stronger bottom lines.
The Nigerian Exchange (NGX) has reflected this investor confidence. As of October 14, 2025, the All-Share Index (ASI) has gained 43.60% year-to-date, while market capitalization stood at an impressive N93.77 trillion.
In this evolving landscape, the key question for investors is: How do you pick the right Nigerian stocks in 2025?
Liquidity first
Liquidity determines whether you can buy or sell shares easily without triggering large price swings or experiencing long delays.
It is generally safer to invest in companies with strong trading liquidity, as this ensures easier entry and exit positions.
- As a practical guide, investors should focus on companies that have recorded an average monthly trading volume of around 20 million shares consistently for at least three consecutive months.
- While firms with lower volumes say around five million shares per month may still be considered, higher trading volumes provide greater flexibility and confidence.
For instance, FCMB, Universal Insurance, Linkage Assurance, Fidelity Bank, Access Holdings, AIICO Insurance, Zenith Bank, and UBA are among the most actively traded stocks on the NGX, each recording an average of over 500 million shares traded monthly in the past three months.
Define your investment objective
Once liquidity is established, investors must define their investment objective, the “why” behind every stock choice.
Your goal determines whether you focus on companies that are growing, pay dividends, or are undervalued.
Growth
If you’re looking for growth, focus on companies with a proven record of strong earnings and profit expansion.
True growth stocks are those that have demonstrated consistent performance even through Nigeria’s volatile economic cycles, from currency devaluations to inflationary and disinflationary phases.
A good benchmark is to identify firms that have achieved a compound annual growth rate (CAGR) of at least 30% in profit over the past five years.
This level of sustained growth indicates operational strengths, consistency, and resilience.
- Banking sector: On average, banks have delivered a five-year profit CAGR of about 63%. Wema Bank, for instance, has grown its profit by over 100% annually.
- Agricultural sectors: Okomu Oil and Presco Plc have demonstrated strong performance, each recording an average profit growth of over 64% per year over the past five years. Though not as heavily traded as the major banks, both companies maintain healthy trading liquidity, averaging over five million shares per month in the last three months, meeting the combined criteria of growth and tradability.
Income Investors
If your investment objective is income, prioritize regular dividend payouts over aggressive growth.
Focus on mature, cash-rich firms with a track record of paying consistent dividends, ideally maintained over the past several years.
Examples include Seplat Energy, Okomu, Presco, Dangote Cement, Aradel, and BUA Foods. These companies combine stable earnings with predictable dividend payments.
It is crucial to assess the actual dividend yield relative to the share price, as this determines the income efficiency of your investment.
The higher the yield, the better. Many banking stocks are also known for high dividend yields, offering both liquidity and income stability.
Value Investors
Chasing value is about identifying a stock’s real worth, not just its market price. The key question is whether the market value reflects the company’s intrinsic value. If the market price is below what the stock is actually worth, you’re getting true value.
Target solid companies trading below their intrinsic worth, offering upside potential.
Look for low earnings multiples combined with strong profit growth. Even companies with higher multiples may still represent value if earnings are growing rapidly.
For example, BUA Foods trades at 28x earnings, which may appear high at first glance. However, it has delivered a compound annual profit growth of over 70%, and coupled with double-digit dividends, it remains an attractive investment.
Overall, at first glance, navigating liquidity, growth, income, and value criteria may seem complicated or stressful.
Investors can either engage a trusted financial adviser or painstakingly adopt these measures themselves.
That said, there are several stocks on the NGX that fit neatly into these combined criteria.
- Banking stocks such as FCMB, Zenith Bank, GTCO, UBA, Access Holdings, and Fidelity Bank offer strong liquidity and sustained profit growth, often coupled with attractive dividends.
- In the agricultural sector, Okomu Oil and Presco Plc deliver robust profit growth with sufficient tradability.
- In other sectors, companies like Seplat Energy, BUA Foods, and Dangote Cement combine consistent earnings, dividends, and market presence, making them suitable candidates for investors seeking a balance of growth, income, and value.
By focusing on stocks that meet these practical benchmarks, investors can increase the likelihood of both smooth trading and strong long-term returns, while reducing the risk of being trapped in thinly traded or fundamentally weak stocks.
Read also Nigerian Exchange Delisting Dilemma: A symptom of chronic ailment?
