Global Economy
According to the Bureau of Labour Statistics (BLS), US headline inflation rose to 2.9% y/y in August (July: 2.7% y/y), broadly in line with market expectations. The modest acceleration was primarily driven by higher food and energy prices, even as core inflation held steady. Food inflation rose to 3.2% y/y from 2.9% y/y in July, reflecting an uptick in food-at-home costs (+2.7% y/y vs. July: +2.2% y/y), while the cost of food consumed away from home remained unchanged at +3.9% y/y.
Likewise, energy inflation turned positive at 0.2% y/y (July: -1.6% y/y), following higher gasoline and fuel oil prices. Core inflation, by contrast, was stable at +3.1% y/y, as higher prices for new and used vehicles offset a moderation in shelter and medical services inflation.
On a month-on-month basis, headline inflation increased by 0.4% in August (July: +0.2% m/m), mainly reflecting higher shelter costs, which remain a key structural driver of the inflation trajectory. Looking ahead, headline inflation is expected to remain influenced by tariff-related cost pressures and strong service demand, even as core prices stay broadly stable.
Nonetheless, despite lingering inflation risks, the US Fed is likely to consider the continued weakening of the labour market, as reflected in the recent jobs data, in its decision on a policy rate cut at the September monetary policy meeting. This is consistent with prevailing market expectations, as the CME FedWatch Tool reflects a fully priced-in probability of 100% for a rate cut at the Fed’s September 17 policy meeting.
Recent data from the National Bureau of Statistics showed that China recorded a deflation rate of 0.4% y/y in August, after remaining flat in July, below market expectations of -0.2% y/y. Year-to-date, this represents the fifth deflationary print, reflecting persistent demand weakness, particularly in food, even as non-food and core categories showed resilience.
Food inflation slumped to -4.3% y/y (July: -1.6% y/y) – the lowest level in nearly four years –, driven largely by excess pork supply which has depressed prices. In contrast, non-food inflation edged higher to +0.5% y/y (July: +0.3% y/y), supported by Beijing’s subsidies aimed at boosting consumer goods purchases. Core inflation rose modestly to 0.9% y/y (July: +0.8% y/y) – the highest level in 18 months –, underpinned by government-led measures to encourage domestic consumption.
However, on a sequential basis, consumer prices were flat in August (July: +0.4% m/m), suggesting that underlying momentum remains fragile. Looking ahead, deflationary pressures are expected to linger, primarily reflecting weak household demand and persistent food price declines, particularly in pork. While government subsidies and promotional campaigns have provided a modest lift to the non-food and core categories, the recovery remains fragile. With consumer sentiment still subdued and external risks — most notably slowing global demand and trade frictions — clouding the outlook, price momentum is likely to stay soft in the near term.
Global Markets
Global equities ended the week on a broadly positive note, buoyed by a combination of supportive macro data and policy signals across major economies. In the US, softer labour market readings, weaker-than-expected producer prices, and annual inflation in line with forecasts bolstered expectations of a Fed rate cut next week, driving gains in the DJIA (+1.6%) and S&P 500 (+1.6%).
Investor optimism was further boosted by a strong rally in Oracle Corporation (ORCL) following robust cloud bookings, underscoring sustained AI-related demand. European markets (STOXX 600: +1.5%; FTSE 100: +1.2%) tracked Wall Street higher, with sentiment reinforced by stronger UK retail sales and the ECB’s decision to hold rates steady while signalling policy continuity.
In Asia, equities advanced as liquidity support from the PBoC and optimism in AI-linked sectors lifted Chinese indices (SSE: +1.5%), while a sharp rally in Japanese tech stocks and an upward revision to Q2 GDP data drove outsized gains in the Nikkei 225 (+4.1%). Meanwhile, emerging and frontier markets also posted gains (MSCI EM: +2.7%; MSCI FM: +0.3%), led by China (+1.5%) and Vietnam (+0.6%), reflecting improved risk appetite and positive spillovers from the global market momentum.
Nigeria: Domestic Economy
According to the CBN, private sector activity in Nigeria remained in expansionary territory for the ninth consecutive month, although the composite PMI moderated to 51.7 points in August (July: 52.7 points), reflecting slower momentum in industry and services. The Industry PMI slipped into contraction at 49.1 points (July: 51.1 points), ending an eight-month expansion streak, as easing consumer demand weighed on new orders, output, raw materials purchases, and employment indicators.
The Services PMI eased to 51.9 points (July: 52.8 points), sustaining a seventh consecutive month of growth but highlighting softer expansion in output, new orders, inventories, and employment, with notable weakness in the finance, hospitality, and education subsectors. Meanwhile, the Agriculture sector sustained its resilience, holding steady at 53.9 points for the 13th consecutive month of expansion, as seasonal slowdowns were offset by stronger inventory accumulation and new orders.
Looking ahead, we anticipate that private sector activity will sustain its expansion, aided by improving macroeconomic conditions such as naira stability and easing inflationary pressures. Nonetheless, weak consumer demand, softening employment indicators, and persistently tight financial conditions highlight fragile underlying fundamentals and present downside risks to overall economic activity in the near term, pending the much-anticipated dovish tilt in monetary policy.
Based on data obtained from the National Communications Commission (NCC), Nigeria’s telecoms sector recorded a contraction in July, as active telephony subscribers fell by 1.4% m/m to 169.33 million (June: 171.73 million), largely reflecting the correction of reporting discrepancies by a major operator. The total number of internet subscribers also weakened, declining by 2.1% m/m to 138.22 million (June: 141.17 million).
On a year-on-year basis, average telephony and internet subscriptions dropped by 20.4% and 11.3% respectively, underscoring the combined impact of SIM disconnections linked to NIN compliance and ongoing adjustments for reporting accuracy. Market dynamics remain concentrated, with MTN maintaining its dominant position at 52.7% share (89.14 million subscribers), well ahead of Airtel Nigeria at 33.4% (56.52 million).
Globacom retained a modest 12.3% share (20.74 million), while 9mobile continued to lag significantly, holding just 1.6% (2.73 million). Overall, the latest data highlight structural pressures weighing on sector growth, as regulatory compliance measures and data corrections continue to suppress headline subscriber counts despite resilient underlying demand.
Looking ahead, we anticipate that the ongoing SIM reactivation initiatives and reduced regulatory pressures will support a recovery in the subscriber base, with MTN Nigeria and Airtel Nigeria likely to lead the rebound, given their strong market presence and extensive distribution networks. Nonetheless, we expect the subscriber data to decline further as the NCC continues to resolve discrepancies in subscriber records.
Capital Markets: Equities
The Nigerian equities market rebounded this week, with the All-Share Index closing higher in four of five trading sessions, thereby ending a four-week losing streak. Renewed positive sentiment saw investors take positions in stocks offering attractive entry points. Consequently, the benchmark index advanced by 1.2% w/w to 140,545.69 points, driven by gains in WAPCO (+13.3%), ZENITHBANK (+4.8%), UBA (+4.2%) and DANGSUGAR (+9.1%).
Consequently, the month-to-date and year-to-date returns improved to +0.3% and +36.7%, respectively. On trading activities, both volume and value declined by 37.7% w/w and 39.5% w/w, respectively. Sectoral performance was broadly positive, with gains recorded across Oil & Gas (+2.4%), Insurance (+2.4%), Banking (+1.7%), Industrial Goods (+1.1%), and Consumer Good (+1.0%) indices.
Next week, investor sentiment is expected to remain cautious, with portfolio flows skewed toward fundamentally justified stocks offering compelling entry opportunities. Market focus will also shift to the August inflation print, where evidence of sustained disinflation could reinforce expectations of a potential MPC rate cut later this month.
Money Market and Fixed Income
The overnight (OVN) rate declined marginally by 4bps to 27.0% as the absence of any liquidity management measures by the CBN caused system liquidity to remain sturdy. As a result, the system’s net long position increased to NGN1.95 trillion (vs. NGN1.47 trillion in the prior week).
Next week, if there is an absence of mop-up activities by the apex authority, we expect inflows from FGN bond coupon payments (NGN141.71 billion) to boost system liquidity, causing the OVN rate to remain depressed.
Treasury Bills
The Treasury bill secondary market traded with bullish sentiments, driven by strong interbank liquidity. Consequently, the average yield decreased by 25bps w/w to 21.8%. By segment, OMO yields contracted by 71bps to 24.8%, offsetting a 22bps increase in NTB yields to 18.8%. We attribute the decline in OMO yields to the absence of OMO issuance by the CBN, which has led to increased demand in the secondary market.
Looking ahead, we expect the robust system liquidity to spur demand for bills, causing yields to taper marginally. Additionally, the DMO is scheduled to conduct an NTB PMA next Wednesday (September 17), with NGN290.00 billion worth of bills on offer.
Bonds
Similarly, the FGN bond secondary market was bullish, with the average yield dropping by 29bps to 16.7%. This sentiment was primarily driven by speculation from market players about a potential rate cut at the upcoming Monetary Policy Committee meeting this month. Across the benchmark curve, the average yield decreased at the short (-17bps), mid (-42bps), and long (-1bp) segments, driven by demand for the JUL-2030 (-76bps), FEB-2031 (-93bps), and JUN-2053 (-7bps) bonds, respectively.
We expect the bullish sentiment to persist in anticipation of a dovish tilt at the September MPC meeting, combined with elevated system liquidity.
Foreign Exchange
The naira appreciated this week by 0.1% w/w to NGN1,519.00/USD, supported by the USD29.10 million intervention by the CBN. Meanwhile, gross FX reserves increased for the tenth consecutive week, growing by USD87.11 million w/w to USD41.66 billion (September 11).
In the forwards market, the naira rates appreciated across the 1-month (+1.8% to NGN1,533.03/USD), 3-month (+2.6% to NGN1,586.34/USD), 6-month (+3.8% to NGN1,663.17/USD) and 1-year (+5.6% to NGN1,814.93/USD) contracts.
In the near term, we expect the naira to remain stable, underpinned by resilient FX market liquidity and improving domestic inflows. Anticipated capital inflows should benefit from the expected Fed rate cut and broader easing in global yields, which could bolster investor appetite for naira-denominated assets.
At the same time, stronger non-oil export receipts and reduced incentives for speculative positioning should reinforce the positive momentum, and suggest a more balanced FX market outlook.
Cordros
