Where should Nigerians invest N1 million this year? 

With inflation at 34.60% as of November 2024, the priority is not just returns but real returns; those that outpace inflation.

The time value of money highlights the need: N1 today is worth more than N1 tomorrow.

If your investment does not provide returns above inflation, you are effectively losing money.

Additionally, the investment environment is shaped by liquidity, capital preservation, and risk appetite.

Albeit the choice of investment outlet boils down to other key considerations: your age, your investment objectives, etc.

These factors are interrelated, form the foundation of any sound investment strategy, and must guide any decision, as chasing high returns without considering the risks can lead to significant losses.

That said, let us explore the performance of various asset classes, outlooks, and which ones may offer the best investment opportunities for the year.

The best place to invest N1 million in 2025 would be a diversified portfolio consisting of various sectors; oil and gas sector stocks, such as Seplat, Conoil, and Aradel, insurance sector alongside banking sector stocks.

While banking stocks underperformed in 2024 compared to 2023, the principle of “buy low, sell high” presents an opportunity to capitalize on potential recovery and growth in the sector.

With the current inflation rate, there are very few asset classes in Nigeria that offer positive inflation-adjusted returns.

Additionally, these stocks provide an added incentive for investors, with dividend yields ranging from 2% to 12%, combining capital appreciation with income generation.

However, equities are notoriously volatile. A bullish year does not guarantee a repeat.   

Another asset class to consider is exchange-traded funds. ETFs offer an attractive middle ground, providing exposure to a basket of securities while spreading risk. There are twelve ETFs on the NGX right now.

Given these factors, putting the entire N1 million here exposes you to risks, especially in volatile or underperforming sectors. However, it is capable of giving a positive real return.

Fixed-income instruments like Treasury Bills, Commercial Papers, and FGN Bonds are staples for conservative investors.

Fixed-income instruments like Treasury Bills, Commercial Papers, and FGN Bonds are staples for conservative investors.

However, these returns barely outpaced inflation, which stood at 34.60% in November 2024, resulting in limited or negative real returns.  

Additionally, rising rates in 2024 may reverse in 2025, potentially reducing yields and leading to mark-to-market losses on existing holdings.

Fixed-income investments are ideal for stability and steady cash flow, but they may not generate real returns in a high-inflation environment.

A better strategy is not to invest the N1 million in fixed-income investment but to adopt a diversification strategy of allocating about 30%. 

If the prospective investor has a low-risk appetite, then mutual funds are also an option to consider with a low-risk appetite.

There are money market mutual funds, equity mutual funds, fixed-income mutual funds, Dollar mutual funds, real estate investment trust funds, etc.

They are professionally managed and offer the opportunity to diversify across different financial markets.

While some funds delivered strong returns, many failed to outpace Nigeria’s inflation rate, leading to negative real returns for investors in lower-performing funds.

High-performing equity funds or mixed funds may be more suitable for growth-focused investors, while money market funds provide stability for conservative investors. 

Overall, there are no one-size-fits-all investment strategies in 2025. Based on key considerations, a diversified portfolio offers the best chance of achieving real returns while managing risks: