Investors in Kenya are unlikely to enjoy the high returns they experienced in 2024, as falling interest rates and global market shocks dampen the outlook for bonds, equities, and bank savings.
Last year, asset classes such as stocks, Treasury bonds, money market funds, and fixed bank deposits delivered double-digit returns, driven by billions in capital gains and interest earnings.
These gains came despite challenging economic conditions, pushing both individual and institutional investors to seek refuge in government securities and equities. Commercial banks also leaned heavily toward lending to the government, amid weak demand for consumer and business loans.
However, in 2025, the investment landscape is changing. The Central Bank of Kenya (CBK) has made aggressive rate cuts to reduce the government’s borrowing costs, significantly lowering returns on Treasury bills and bonds, now back in the single-digit range.
At the same time, international tensions—most notably new tariffs imposed by U.S. President Donald Trump—have rattled global markets, with fears of a trade war and recession hurting investor sentiment.
Locally, the Nairobi Securities Exchange (NSE) lost Sh74.3 billion in investor wealth within a week of the tariffs announcement. Since January, the bourse has posted a modest gain of 2.7 percent, equivalent to Sh53 billion in market capitalization.
This pales in comparison to the same period in 2024, when the NSE added Sh328 billion (22 percent) in the first quarter alone, eventually closing the year with an annual growth of 34.8 percent or Sh500.8 billion—making equities the best-performing asset class that year.
Analysts attribute the stellar performance in 2024 to a low base effect, following two years of a bear market. This means there’s limited room for further gains in 2025, even if company earnings improve.
“The gains last year represented a recovery from a lean period in 2022 and 2023, largely driven by banks and other large blue-chip stocks,” said Wesley Manambo, Senior Research Associate at Standard Investment Bank. “Given the high base, we are likely to see limited upside this year, despite stronger company fundamentals.”
He added that the current global uncertainty could also lead foreign investors to remain in their home markets longer, avoiding riskier frontier markets like Kenya.
Traditionally, when equity markets become volatile, investors shift to bonds seeking safer, more predictable returns. In 2024, retail investors—including individuals, SACCOs, religious groups, and private firms—increased their holdings of government debt by Sh201.6 billion, bringing the total to Sh772.3 billion. As of April 4, 2025, this figure had grown by another Sh30.4 billion to Sh802.7 billion.
But returns in the fixed-income space are now falling. The CBK has slashed its benchmark rate from 13 percent in August 2024 to 10 percent, signaling a move to a lower interest rate environment.
Treasury bill rates have since dropped to 8.5 percent for the 91-day paper, 8.89 percent for the 182-day, and 10.23 percent for the 364-day paper—down from highs of nearly 17 percent just a year ago.
Similarly, long-term government bonds issued in 2025 are offering yields ranging between 13.5 percent and 15.7 percent, compared to 14.7 to 18.9 percent in 2024.
This shift is also expected to affect bank deposit rates. Last year, banks were forced to offer higher fixed deposit rates—peaking at 11.48 percent in June, a 25-year high—to compete with government securities, especially as the CBK’s Dhow CSD platform made it easier for investors to move funds into bonds and T-bills. With government rates now declining, banks may reduce returns on deposits, particularly for high-net-worth customers.
