The U.S. Federal Reserve’s recent decision to cut interest rates by 25 basis points has implications that extend far beyond American shores.

For Nigeria, this move could unlock a new wave of foreign portfolio investment (FPI) into the equities market.

With the Fed lowering rates, the cost of capital declines, often triggering a flow of funds from developed markets into higher-yielding emerging markets.

Nigeria, with its relatively attractive returns and improving monetary stability, stands out as a potential beneficiary.

Nigerian equities landscape

In 2024, Nigerian equities; the NGX All-Share Index (ASI) gained 37.65%, ahead of U.S. benchmarks like the S&P 500, which returned around 25%.

More importantly, over 66 Nigerian stocks beat inflation (34.80%) that year, providing positive real returns despite high macroeconomic pressures.

So far in 2025, the rally has continued, with the ASI gaining 38% YtD as of mid-September, and with over 99 stocks, comfortably outpacing August inflation at 20.13%.

This strong nominal-to-real return spread is supposed to make Nigerian equities an attractive hunting ground for foreign investors, especially as U.S. Treasury yields hovering around 4.1% look less rewarding after the Fed’s policy shift.

However, domestic investors still dominate the Nigerian market.

There is an improvement in 2025 compared to 2024 foreign participation has risen from 15.25% to 21.33%, showing renewed interest.

Although net flows are still negative, the pace of foreign inflows is much stronger this year.

If U.S. rates continue to fall, narrowing the yield appeal of U.S. Treasuries while Nigerian equities maintain high real returns, Nigeria could see a reversal to net inflows by year-end 2025, especially into undervalued sectors like banking.

Sectors likely to benefit and to watch

Banking sector

Oil & Gas/Energy

Industrial Goods

Consumer Goods

Telecoms

Nigeria has some strong selling points for foreign investors right now.

But challenges remain. The naira, though relatively stable, is still weak and could undermine returns when measured in dollar terms.

If Nigeria sustains FX stability and inflation continues to ease, U.S. rate cuts could increase the flip foreign flows positive in 2025.

For now, banks, energy, and industrials look like the biggest magnets for offshore capital.