Global Economy
According to the Bureau of Economic Analysis (BEA), the US economy expanded by 3.0% q/q in Q2-25 (Q1-25: -0.5% q/q) – above market expectations (+2.4% q/q). The rebound was primarily driven by a sharp decline in imports (-30.3% q/q), after the 37.9% q/q surge in Q1-25, boosting net exports. Conversely, exports (-1.8% q/q vs Q1-25: +0.4% q/q) declined modestly, reflecting softer foreign demand, likely due to trade-related uncertainty and recent tariff escalation on US automotive products. Meanwhile, consumer spending (+1.4% q/q vs Q1-25: +0.5% q/q) expanded, with broad-based growth across both goods and services.
However, private investment (+15.6% q/q vs Q1-25: +23.8% q/q) fell sharply, reflecting weakness across residential and non-residential segments. Government expenditure (+0.4% q/q vs Q1-25: -0.6% q/q) improved following increased expenses on national defence. On a year-on-year basis, real GDP held steady at 2.0% in Q2-25 (Q1-25: +2.0% y/y). Despite lingering policy uncertainty and weak private investment, we anticipate US growth to remain resilient in the near term. This neatly aligns with the IMF’s recent upgrade of the US GDP forecast for 2025 to 1.9%—up from 1.8% earlier—citing less severe tariff impact, a weaker dollar, and improved financial conditions. While risks persist, the combination of tariff relief, monetary stability, and fiscal support from the One Big Beautiful Bill Act should help sustain momentum into H2‑25.
According to flash estimates from Eurostat, the Euro Area’s real GDP expanded by 0.1% q/q in Q2-25 (Q1-25: +0.6% q/q) – slightly above market expectations (0.0% q/q). The modest outturn reflects softening external demand and fading effects of earlier trade front-loading, despite signs of resilience in consumer and services activity. Across member states, Germany (-0.1% q/q vs Q1-25: +0.3% q/q) and Italy (-0.1% q/q vs Q1-25: +0.3% q/q) slipped into contraction, while France (+0.3% q/q vs Q1-25: +0.1% q/q), Spain (+0.7% q/q vs Q1-25: +0.6% q/q), and Portugal (+0.6% q/q) continued to expand. On an annual basis, GDP rose by 1.4% y/y in Q2-25 (Q1-25: +1.5% y/y), supported by services and household consumption.
While downside risks persist —particularly from euro appreciation and trade-related uncertainty affecting exports —domestic demand is expected to remain resilient. This resilience is underpinned by easing inflation, stable labour market conditions, and improved financial conditions following lower interest rates. As such, we anticipate a gradual pickup in growth over the medium term, consistent with the IMF’s upwardly revised 2025 forecast of 1.0% y/y (April estimate: 0.8%; 2024FY: +0.9% y/y).
Global Markets
Global equities traded broadly lower this week as investors digested a wave of new US tariffs, ranging from 10.0% to 50.0%, imposed on imports from key trading partners. Sentiments were further dampened by a flurry of corporate earnings reports and policy updates from major central banks. At the time of writing, US equities (DJIA: -1.7%; S&P 500: -0.8%) were on track to close the week in negative territory, pressured by the expiration of the August 1 tariff grace period, mixed earnings from tech majors—Amazon, Microsoft, Meta, and Apple—and the Federal Reserve’s decision to keep rates unchanged.
Similarly, European equities (STOXX Europe: -1.6%; FTSE 100: -0.4%) markets also came under pressure amid growing concerns over the economic impact of the new US levies and an uneven earnings season, with notable releases from AstraZeneca, HSBC, Shell, Unilever, Rolls-Royce, Sanofi, and Ferrari. In Asia, major indices (Nikkei 225: -1.6%; SSE: -0.9%) followed the global downtrend, further pressured by uncertainty surrounding US–China trade talks and the Bank of Japan’s interest rate decision and revised inflation outlook for 2025. Meanwhile, the Emerging market and Frontier market (MSCI EM: -1.2%; MSCI FM: -1.2%) indices settled lower, driven by losses in China (-0.9%) and Vietnam (-2.7%).
Nigeria: Domestic Economy
According to the data from FMDQ, total inflows into the Nigerian Foreign Exchange Market (NFEM) declined by 20.9% m/m to USD3.83 billion in July (June: USD4.84 billion), primarily driven by declines in inflows from both foreign (45.8% of total inflows) and local sources (54.2% of total inflows). Specifically, inflows from foreign sources dropped by 35.6% m/m to USD1.75 billion (June: USD2.73 billion) following declines in inflows across FDIs (-79.8% m/m), other corporates (-60.1% m/m) and FPIs (-34.8% m/m) segments.
At the same time, inflows from local sources marginally declined by 1.9% m/m to USD2.07 billion (June: USD2.11 billion) primarily due to the decline in the Exporters/Importers (-30.1% m/m) segment. Inflows from individuals (+117.5% m/m), CBN (+77.8% m/m), and non-bank corporates (+5.4% m/m) segments recorded higher accretions. In the near term, we expect foreign exchange inflows from both local and foreign sources to remain robust—surpassing 2024 levels (2024FY average: USD2.51 billion)—driven by improving market confidence and still-attractive naira yields for foreign portfolio investors (FPIs).
In the July edition of its World Economic Outlook (WEO), the IMF expects Nigeria to grow by 3.4% y/y in 2025E (2024FY: +3.4% y/y) – 40bps higher than the April forecast (+3.0% y/y). The revised growth forecast primarily reflects strong economic activity in Q1-25, particularly in the oil sector, as improved security and investment have increased oil production.
Accordingly, the IMF expects sub-Saharan Africa to grow by 4.0% y/y in 2025E (April estimate: 3.8% y/y; 2024FY: +4.0% y/y), in line with their growth expectations for Nigeria and South Africa (2025E: +1.0% y/y vs 2024FY: +0.5% y/y). Further out, the IMF expects global growth to moderate to 3.0% y/y (2024FY: +3.2% y/y) – 20bps higher than the April forecast (+2.8%), with apparent resilience due to trade-related distortions waning. While we broadly align with the IMF on Nigeria’s growth outlook, our projection for 2025E (3.60% y/y) is slightly more optimistic. We expect improvements in oil production, a relatively stable currency, ongoing disinflation, and better financial conditions to collectively support stronger economic activity.
Capital Markets: Equities
The Nigerian equities market closed higher for the tenth consecutive week, sustaining its bullish momentum through July (+16.6% m/m) and into the first trading session of August (+1.0%). Market sentiment remained buoyant, supported by a string of robust H1-25 corporate earnings releases and interim dividend declarations. Consequently, the NGX All-Share Index advanced by 5.1% w/w to 141,263.05 points, driven by strong performances in heavyweight counters such as MTNN (+20.0%), DANGCEM (+7.2%), BUACEMENT (+9.6%), BUAFOODS (+5.3%), and WAPCO (+19.2%). Meanwhile, month-to-date (MTD) and year-to-date (YTD) returns settled at +1.0% and +37.2%, respectively. On trading activity, both volume and value traded increased by 31.3% w/w and 33.4% w/w, respectively. Sectoral performance was mixed as the Industrial Goods (+10.1%), Banking (+3.5%), and Consumer Goods (+2.7%) indices advanced, while the Insurance (-1.2%) and Oil & Gas (-0.5%) indices closed lower.
With most H1-25 results in and broadly ahead of expectations, we expect the market rally to persist as investors reposition and reprice for earnings upside. We also anticipate sustained rotation into equities amid subdued yields in the fixed income market.
Money Market and Fixed Income
The overnight (OVN) rate declined by 2bps w/w to 26.9% driven by the strong liquidity open (NGN2.02 trillion), inflows from contractor payments (c. NGN300.00 billion) and FGN bond coupon payments (NGN41.28 billion), which offset debits for the FGN bond PMA (NGN185.93 billion). Following the buoyant liquidity, the CBN conducted an OMO PMA, mopping up NGN1.55 trillion. Nonetheless, the average system liquidity remained robust, settling at a net long position of NGN1.19 trillion (compared to a net long position of NGN547.28 billion in the previous week).
In the absence of liquidity management measures by CBN, we expect system liquidity to remain strong, weighing on OVN rate.
Treasury Bills
The Treasury bills market traded with bearish sentiments as market players anticipated a second OMO auction from the CBN to manage the buoyant system liquidity. Accordingly, the average yield across all instruments advanced by 11bps to 21.4%. Across the market segments, the average yield advanced by 7bps and 4bps to 17.8% and 24.7% in the NTB and OMO segments, respectively. The CBN conducted an OMO auction on Monday, offering instruments worth NGN600.00 billion – NGN300.00 billion for the 113D and NGN300.00 billion for the 204D. Total subscription levels settled at NGN1.63 trillion (bid-to-offer ratio: 2.7x), with the CBN allotting NGN1.55 trillion for the 204D bill only, at a stop rate of 23.87%.
Next week, we anticipate bullish sentiments as investors reprice yields downwards, aided by the liquidity surfeit and the possibility of continued curtailing of the supply of instruments by the FG. Additionally, the DMO is scheduled to conduct an NTB PMA next Wednesday (August 6) with NGN220.00 billion worth of bills on offer. At the auction, we expect rates to taper.
Bonds
The FGN bond secondary market was quiet this week, with a bearish undertone, as offers improved on the back of higher-than-expected auction issuance. Profit-taking activities from traders and subdued demand from portfolio managers further supported market sentiments. Accordingly, the average yield for bonds increased by 14bps to 16.4%. Across the benchmark curve, the average yield increased at the short (+8bps), mid (+34bps), and long (+3bps) segments, driven by selloffs of the JAN-2026 (+73bps), FEB-2031 (+59bps), and JUN-2053 (+35bps) bonds, respectively. At Monday’s PMA, the DMO offered instruments worth NGN80.00 billion to investors through the re-opening of the 19.30% FGN APR 2029 (Bid-to-offer: 2.0x; Stop rate: 15.69%) and 17.95% FGN JUN 2032 (Bid-to-offer: 2.9x; Stop rate: 15.90%) bonds. Total subscription level settled at NGN211.58 billion (previous: NGN602.86 billion), with a bid-to-offer ratio of 2.6x (previous: 6.0x). Eventually, the DMO allotted NGN185.93 billion across the two tenors, resulting in a bid-to-cover ratio of 1.1x.
Over the medium term, we expect moderation in bond yields, influenced by – (1) the anticipated dovish monetary policy stance and (2) demand and supply dynamics.
Foreign Exchange
The naira appreciated this week by 1.2% w/w to NGN1,520.00/USD, supported by supply from FPIs looking to participate in the OMO PMA. Meanwhile, gross FX reserves increased for the fourth consecutive week, growing week by USD593.75 million w/w to USD39.36 billion (July 30). In the forwards market, the naira rates appreciated across the 1-month (+0.6% to NGN1,567.61/USD), 3-month (+1.2% to NGN1,627.53/USD), 6-month (+2.5% to NGN1,714.93/USD) and 1-year (+4.4% to NGN1,884.07/USD) contracts.
We maintain our optimism on the naira as FX liquidity is poised to remain robust. Still elevated yields particularly in the OMO market as well as a weaker dollar are expected to continue to drive FX inflows from FPIs to the FX market in the near term. We also believe the stronger market confidence and low incentives for naira speculation will continue to contribute to robust inflows from local sources.
Cordros
