Global Economy
According to the recently published PMI report from S&P Global, the United States (US) composite PMI remained above the 50.0 points threshold for the 29th consecutive month, rising to 54.6 points in July (June: 52.9 points) as strong growth in the services sector offset a slowdown in manufacturing. Services PMI expanded to 55.2 points (June: 52.9 points), the fastest pace in seven months, supported by robust new business inflows and higher consumer spending.
Nonetheless, we note that input costs surged during the period, driven by renewed tariff pressures and wage increases, prompting a sharp rise in output charges. Conversely, the manufacturing PMI declined to 49.5 points (June: 52.6 points), indicating contraction in factory activity amid weaker output and falling export orders. Nonetheless, firms across both sectors expanded their employment levels in response to current demand and the clearance of backlogs.
We expect private sector activity in the US to remain in the expansionary territory in the near term, sustained by resilient domestic demand and a robust services sector. Nonetheless, rising cost pressures from tariffs, weaker external demand, and elevated policy uncertainty pose downside risks that may weigh on business confidence and near-term output momentum.
At their recently concluded July policy meeting, the Governing Council of the European Central Bank (ECB) opted to keep the three key interest rates unchanged. Specifically, the deposit facility was held at 2.00%, while the main refinancing operations and the marginal lending facility were maintained at 2.15% and 2.40%, respectively.
While the committee acknowledged that inflation has converged near the ECB’s 2.0% medium-term target, supported by easing domestic price pressures and moderating wage growth, they judged that holding rates steady remains appropriate amid persistent external uncertainties, particularly renewed trade tensions and tariff-related risks. Although the committee provided no explicit forward guidance, they reaffirmed a data-dependent, meeting-by-meeting approach to policy decisions.
At the monetary policy press conference, the ECB President, Christine Lagarde, described the Eurozone as being in a “good place,” with growth broadly in line or slightly above expectations, signaling no immediate urgency for further rate easing. In our view, this tone suggests the ECB may adopt a wait-and-see posture in the near term, likely keeping rates steady at their next policy meeting on September 11, while closely monitoring underlying inflation trends, wage dynamics, and external risk factors, particularly on the trade front, before making any further policy adjustments.
Global Markets
Trade deal optimism and robust corporate earnings underpinned positive sentiment in global equities this week, helping investors overlook lingering uncertainty around the Federal Reserve’s rate-cut trajectory. Accordingly, US equities (DJIA: +0.8%; S&P 500: +1.1%) were on track to close the week higher, buoyed by upbeat corporate earnings and optimism over potential trade breakthroughs ahead of President Trump’s August deadline.
Likewise, European equities (STOXX Europe 600: +0.3%; FTSE 100: +1.3%) were buoyed by optimism over a possible 15.0% tariff deal between the US and the EU. Asian equities (Nikkei 225: +4.1%; SSE Composite: +1.7%) also rallied, lifted by news of a trade deal between the US and Japan that would reduce planned tariffs on Japanese exports from 25.0% to 15.0%, and renewed hopes following a scheduled US–China trade dialogue next week. Meanwhile, the Emerging Market (MSCI EM: +1.4%) and Frontier Market (MSCI FM: +1.4%) indices advanced, supported by gains in China (+0.7%) and Vietnam (+3.0%), respectively.
Nigeria: Domestic Economy
The National Bureau of Statistics (NBS) released the rebased GDP figures on July 21, updating the base year for real GDP calculations from 2010 to 2019. The exercise introduced key changes: (1) a sharp upward revision of nominal GDP (2024: +34.4% to NGN372.82 trillion), (2) a shift in sectoral composition—higher shares for agriculture and services, with a decline in industry’s contribution, and (3) revised real GDP growth rates compared to the previous base year. Under the new series, the domestic economy grew at a moderate pace in Q1-25, rising by 3.13% y/y (Q4-24: 3.76% y/y), due to broad-based deceleration across both oil and non-oil segments. The oil sector slowed to 1.87% y/y (Q4-24: 5.54% y/y), despite higher crude output (1.62 mb/d vs 1.54 mb/d in Q4-24), likely due to a high base and rebasing effects.
Non-oil growth also moderated to 3.19% y/y (Q4-24: 3.80%), driven by weaker performance in agriculture (+0.07% y/y vs Q4-24: +2.54% y/y) and services (+4.33% y/y vs Q4-24: +4.75% y/y) subsectors, while the manufacturing (+1.69% y/y vs Q4-24: +1.28% y/y) subsector improved. We expect the economy to maintain positive growth in the short to medium term. We anticipate further expansion in the oil sector, driven by enhanced investment and security measures, which are expected to increase output (2025E: 1.70 mb/d). Non-oil growth is likely to remain resilient, driven by recovering household consumption and improving business conditions amid the moderating inflation and a stable naira. Overall, we revise our 2025FY GDP growth forecast to 3.60% y/y (previous: 3.90%), up from 3.34% in 2024.
At the July meeting, the Monetary Policy Committee (MPC) of the Central Bank of Nigeria (CBN) voted to maintain the Monetary Policy Rate (MPR) at 27.50% for the third consecutive time this year. The Committee’s decision to maintain rates was primarily driven by the need to consolidate the disinflationary process and sufficiently contain price pressures. At the same time, the Committee retained all other parameters – Cash Reserve Requirement (CRR) for Deposit Money Banks (DMBs) and Merchant Banks at 50.0% and 16.0%, respectively; the asymmetric corridor around the MPR at +500bps/-100bps and the liquidity ratio at 30.0%. Looking ahead, we expect future decisions by the MPC to be driven primarily by the pace and consistency of disinflation. Should headline inflation and key CPI sub-components remain volatile without a clear and sustained downward trend and global trade tensions persist, the committee is likely to keep the MPR unchanged in the near term.
Capital Markets: Equities
Bullish sentiment prevailed in the local bourse this week, driven by positive reactions to the MPC’s decision to hold rates steady and a wave of impressive Q2 earnings releases. Notably, strong buying interest in BUACEMENT (+9.4%), PRESCO (+22.5%), WAPCO (+9.7%), OANDO (+18.9%) and DANGSUGAR (+14.3%) fueled the market’s advance.
As a result, the NGX All-Share Index rose by 2.2% w/w, to 134,452.93 points, lifting the MTD and YTD returns to +12.1% and +30.6%, respectively. Activity levels were weaker compared to the previous week, with trading volume and value down by 78.9% w/w and 77.6% w/w, respectively. Sectoral performance was broadly positive following gains in the Industrial Goods (+4.7%), Insurance (+3.1%), Consumer Goods (+2.8%), Banking (+1.8%) and Oil & Gas (+0.9%) indices.
In the near term, we expect the full commencement of the H1-25 earnings season to drive market sentiment. With lower stop rates at auctions, we anticipate a gradual rotation into equities as investors reposition for improved risk-adjusted returns amid declining fixed-income yields.
Money Market and Fixed Income
The overnight (OVN) rate contracted by 575bps w/w to 26.9% as system liquidity was bolstered by inflows from the net NTB maturities (NGN37.00 billion), FGN bond coupon payments (NGN284.73 billion) and FAAC disbursement (NGN850.00 billion). Owing to the high liquidity influx, the average system liquidity improved, settling at a net long position of NGN214.13 billion (compared to a net short position of NGN465.18 billion in the previous week).
Barring any mop-up activities by the CBN, we expect the OVN rate to remain subdued, with inflow from FGN bond coupon payments (NGN41.62 billion) supporting liquidity.
Treasury Bills
The Treasury bills secondary market was broadly mixed, with a bullish tilt, broadly reflecting the improvement in financial system liquidity. Accordingly, the average yield across all instruments contracted by 6bps to 21.3%. Across the market segments, the average yield declined by 12bps to 17.7% at the NTB segment expanded by 1bp to 24.7% at the OMO segment. At Wednesday’s NTB auction, the CBN offered bills worth NGN290.00 billion – NGN50.00 billion for the 91D, NGN20.00 billion for the 182D, and NGN220.00 billion for the 364D bills.
Total subscription levels settled at NGN675.66 billion (previous auction: NGN1.33 trillion), indicating a bid-to-offer ratio of 2.3x (previous auction: 6.6x). The auction closed with the CBN allotting exactly what was offered– NGN13.11 billion for the 91D, NGN5.10 billion for the 182D, and NGN271.79 billion for the 364D papers – at respective stop rates of 15.00% (previous: 15.74%), 15.50% (previous: 16.20%) and 15.88% (previous: 16.30%).
We expect the liquid financial system to bolster further bullish sentiments in the Treasury bills secondary market as investors continue repricing yields downwards, aided by shorter supply of instruments.
Bonds
Elsewhere, the FGN bond secondary market was bullish as institutional investors sought to invest their coupons. Accordingly, the average yield for bonds declined by 29bps to 16.3%. Across the benchmark curve, the average yield decreased at the short (-35bps), mid (-43bps), and long (-17bps) segments, driven by heightened demand for the APR-2029 (-48bps), APR-2032 (-69bps), and MAR-2036 (-40bps) bonds, respectively.
In the coming week, we believe the outcome of the July FGN bond auction, scheduled for Monday (July 28) will shape the direction of yields in the secondary market. At the auction, the DMO is set to offer instruments worth NGN100.00 billion through the re-openings of the APR-2029 bond and JUN-2032 bonds. Our expectation for the auction is that marginal rates will taper. We reiterate our medium-term expectation of a moderation in bond yields, influenced by two factors – (1) the anticipated dovish monetary policy stance and (2) demand and supply dynamics.
Foreign Exchange
The naira depreciated by 0.4% w/w to NGN1,538.00/USD, as demand pressures emerged, outweighing supply. Notably, CBN intervened this week, selling c.USD81.00 million to the market. Meanwhile, the gross FX reserves increased for the third straight week by USD778.34 million w/w to USD38.63 billion (July 24). In the forwards market, the naira rates appreciated across the 1-month (+0.2% to NGN1,576.21/USD), 3-month (+0.4% to NGN1,647.65/USD), 6-month (+0.3% to NGN1,757.35/USD) and 1-year (+0.3% to NGN1,966.40/USD) contracts.
We expect the naira to remain relatively stable, supported by robust FX liquidity and sustained inflows from both domestic and foreign sources. This positive outlook is anchored on continued market confidence and attractive naira yields.
Cordros
