Global Economy
At its December 2025 meeting, the Federal Open Market Committee (FOMC) voted to cut the federal funds rate by 25bps for the third consecutive time, setting a new target range of 3.50% – 3.75%. The decision aligned with market expectations, bringing the policy rate to its lowest level since 2022. The Committee noted that the decision was primarily driven by continued softness in the labor market, reflected in rising unemployment and sluggish job creation.
At the same time, the Fed acknowledged renewed upward pressure on inflation, with headline readings drifting further above the 2.0% target amid persistent cost passthrough from President Donald Trump’s tariff measures. Even so, the Fed reiterated its view that the inflationary impact of the tariffs should prove temporary. In its forward guidance, the committee reiterated its data dependent stance but emphasised that the cumulative 175bps easing since September 2024 has brought the federal funds rate into a broad range of its estimated neutral level.
As such, the timing and extent of further adjustments will depend on the evolution of incoming data. Meanwhile, the Fed revised its GDP growth forecasts upward for 2025 (1.7% y/y vs 1.6% y/y) and 2026 (2.3% y/y vs 1.8% y/y), respectively. Looking ahead into 2026, the Fed has signaled the possibility of one additional 25bps rate cut, underscoring its commitment to supporting labour market conditions while ensuring inflation does not remain persistently above the 2.0% target.
Consequently, we believe the US Fed is unlikely to pursue further easing in the near term until there is clear evidence of sustained disinflation. This view is broadly aligned with market expectations, with the CME FedWatch tool now assigning a 73.4% probability of a hold at its next policy meeting.
Recent data from the National Bureau of Statistics showed that consumer prices in China rose sharply by 0.7% y/y in November (October: +0.2% y/y), in line with market expectations. The uptick was driven by a return to positive food inflation alongside a softer increase in non-food prices. Specifically, food inflation (+0.2% y/y vs October: -2.9%) turned positive for the first time in ten months, on higher prices of fresh vegetables and fruits, as well as a less pronounced decline in pork prices.
Similarly, non-food inflation (+0.8% y/y vs October: +0.9% y/y) increased at a softer pace due to government-backed consumer trade in programmes that bolstered domestic demand. Elsewhere, core inflation remained unchanged (+1.2% y/y) at its highest level in twelve months, reflecting the impact of policy measures aimed at stimulating consumption. However, on a month-on-month basis, consumer prices declined slightly (-0.1% m/m vs: October: +0.2% m/m), as travel-related categories such as hotels, airfares, and transportation softened following the extended holiday period in October.
Looking ahead, the return to positive inflation in November, following October’s improvement, suggests that policy measures aimed at stimulating demand are beginning to gain traction. However, persistently soft consumer demand, as evidenced by ongoing factory gate deflation, and the still measured pace of monetary easing continue to limit the strength and durability of the price recovery.
Global Market
Global stocks traded mixed this week as investors digested the Federal Reserve’s policy decision, reassessed the outlook for monetary policy in 2026, and weighed a range of economic and corporate developments. At the time of writing, US equities (DJIA: +1.6%; S&P 500: +0.4%) were on track to close the week in positive territory, supported by the Federal Open Market Committee’s decision to cut the federal funds rate by 25bps, in line with market expectations. The Fed also signalled the possibility of one additional rate cut next year, reinforcing optimism around the easing cycle.
Meanwhile, European equities (STOXX 600: +0.0%; FTSE 100: -0.2%) closed the week lower as optimism surrounding the Fed’s policy stance was offset by a mixed slate of UK macroeconomic data, including an unexpected 0.1% m/m contraction in GDP in October 2025. In Asia, performance was mixed as Japanese stocks (Nikkei 225: +0.7%) closed higher, buoyed by positive spillovers from Wall Street, while Chinese equities (SSE: −0.3%) declined as firmer consumer inflation dampened expectations of additional policy support.
Within emerging markets, the MSCI Emerging Market index (-0.6%) fell primarily reflecting weakness in China (-0.3%), while the MSCI Frontier Markets index (+0.1%) edged higher, driven by gains in Romania (+1.8%).
Nigeria: Domestic Economy
According to the trade report by the National Bureau of Statistics (NBS), total foreign trade rose by 8.7% y/y to NGN38.94 trillion in Q3-25 (Q3-24: NGN35.82 trillion | Q2-25: NGN38.04 trillion). In USD, total trade increased by 12.8% y/y to USD25.58 billion (Q3-24: USD22.68 billion), supported by the rise in total exports (+15.3% y/y to USD14.99 billion), and total imports (+9.5% y/y to USD10.59 billion).
Export performance was driven largely by strong gains in non-crude oil exports (+45.6% y/y) and non-oil exports (+23.9% y/y), which offset a marginal decline in crude oil exports (-0.9% y/y) amid softer average crude prices (Q3-25: USD68.17/bbl vs. Q3-24: USD78.70/bbl). On the import side, total imports rose due to a significant increase in non-oil imports (+45.5% y/y), reflecting improved FX liquidity and firmer consumer demand. This expansion more than offset the sharp contraction in petroleum imports (-45.6% y/y), following the ramp-up in domestic refining capacity.
Overall, Nigeria’s trade balance strengthened by 32.1% y/y to USD4.40 billion (Q3-24: USD3.33 billion), as export growth outpaced the rise in imports. Looking ahead, softer crude oil prices and only modest gains in crude production are expected to continue weighing on crude oil export earnings. Nevertheless, higher export volumes of gas and refined petroleum products should more than offset this drag.
On the import side, improved FX liquidity and the stability of the naira are supporting growth in non-oil imports, while the steady decline in refined petroleum imports is moderating overall import momentum, resulting in a slower pace of increase in total imports. Taken together, the trade balance is projected to remain firmly in surplus in 2025E, reaching USD18.08 billion compared with USD13.17 billion in 2024FY.
Based on the recently released data by the National Bureau of Statistics (NBS), collections from Value Added Tax (VAT) increased by 32.2% y/y to NGN2.06 trillion in Q2-25 (Q2-24: +99.8% y/y to NGN1.56 trillion). We attribute the increase to the combined impact of (1) resilient domestic consumption and (2) higher consumer prices compared to 2024FY levels. On a quarter-on-quarter basis, VAT collections in Q2-25 were broadly flat, rising only 3bps (Q1-25: +6.0% q/q to NGN2.06 trillion).
The marginal uptick was supported by higher collections from foreign VAT (+1.1% q/q to NGN459.95 billion) and Nigerian Customs Service import VAT (+0.3% q/q to NGN508.55 billion), which offset a slight decline in local VAT collections (-0.7% q/q to NGN1.09 trillion). While gradually improving consumer demand and still elevated inflation will continue to support VAT receipts, moderating price pressures and , the appreciation of the naira are expected to limit the pace of growth relative to prior years.
Overall, these factors point to a more moderate trajectory for VAT revenue growth in the near to medium term.
Capital Markets: Equities
The domestic bourse closed higher this week as bargain hunting in MTNN (+13.0%), NB (+9.9%), DANGSUGAR (+11.2%), ZENITHBANK (+2.9%) and GUINNESS (+10.0%) drove the All-Share Index higher by 1.6% w/w to 149,433.25 points. Consequently, the month-to-date and year-to-date return settled higher at +4.1% and +45.2%, respectively.
On market activity, trading volume declined by 33.9%, while trading value increased by 1.9% w/w. Sector performance was broadly positive, as the Insurance (+3.4%), Consumer Goods (+1.1%), Banking (+0.4%), and Industrial Goods (+0.2%) indices all advancing, while the Oil & Gas (-0.1%) index was the sole loser for the week.
Next week, we expect trading activity to remain choppy, albeit with a positive bias, in the absence of any significant catalyst to drive market sentiment.
Money Market and Fixed Income
The OVN rate expanded slightly by 3bps to 22.8% following debits for the OMO PMA (NGN1.32 trillion), amid inflows of NGN1.07 trillion from OMO maturities. Nonetheless, the average system liquidity improved, closing at a net long position of NGN3.54 trillion (prior week: NGN2.93 trillion).
Next week, in the absence of further mop up activities by the CBN, we expect NGN117.50 billion in inflows from OMO maturities to bolster system liquidity and exert mild downward pressure on the OVN rate, though the benchmark is still expected to trade largely around current levels.
Treasury Bills
The Treasury bills market closed the week on a bearish note as market participants unwound positions to fund participation in the ad-hoc NTB PMA conducted on Wednesday, 10 December 2025. As a result, the average yield across all instruments increased by 40bps to 19.7%. Across segments, average NTB yields climbed by 74bps to 17.7% while average OMO yields decreased by 20bps to 21.8%. At Wednesday’s NTB PMA, the DMO offered NGN750.00 billion worth of bills with total subscription reaching NGN1.69 trillion (Bid-to-offer: 2.3x).
Eventually, the DMO sold NGN788.20 billion (Bid-to-cover: 2.1x), maintaining stop rates on the 91-Day at 15.30% and the 182-Day at 15.50%, while the stop rate on the 364-Day bill increased by 45bps to 17.95%. Meanwhile, the CBN conducted two OMO auctions during the week. The first, held on Tuesday, featured NGN600.00 billion on offer across the 98-Day and 140-Day maturities but closed with no allotment. The second auction on Thursday, also with NGN600.00 billion on offer across the 180-Day and 215-Day tenors, saw a robust outcome, with NGN1.32 trillion allotted at stop rates of 19.39% and 19.49%, respectively.
Given the anticipated but modest improvement in system liquidity, we expect only mild downward pressure on bill yields. However, we do not rule out sell offs by investors in anticipation of higher rates at next Wednesday’s auction
Bonds
The FGN bond secondary market turned bearish as traders unwound positions in anticipation of higher supply following the release of the December 2025 issuance calendar. Consequently, the average yield increased by 99bps at 16.6%.
Across the benchmark curve, the average yield increased at the short (+103bps), mid (+143bps), and long (+50bps) segments following sell pressures in the AUG-2030 (+182bps), JUL-2034 (+155bps), and MAR-2036 (+132bps) bonds, respectively. Notably, an FGN bond PMA is scheduled for next Monday with NGN230.00 billion offered apiece across the AUG-2030 and JUN-2032 papers.
We expect the outcome of next week’s bond auction to guide trading sentiment in the secondary market.
Foreign Exchange
The naira depreciated this week by 0.1% w/w to NGN1,456.00/USD, as demand pressures outweighed the robust supply from the CBN (USD250.00 million) and inflow from offshore players looking to participate at the OMO PMA. Meanwhile, gross FX reserves increased for the twenty fifth consecutive week, growing by a strong USD396.84 million w/w to USD45.44 billion (December 11).
In the forwards market, the naira rates depreciated across the 1-month (-0.4% to NGN1,485.97/USD), 3-month (-0.5% to NGN1,536.28/USD), and 6-month (-0.9% to NGN1,599.70/USD) contracts, while it appreciated on the 1-year (+0.3% to NGN1,726.89/USD) contract.
The global environment remains supportive of net capital inflows amid ongoing global monetary easing and reduced geopolitical tensions, while a positive current account position and rising external reserves continue to underpin investor confidence. Furthermore, the pace of growth in goods import demand remains relatively slow, helping to contain demand pressures. Therefore, we expect the naira to remain broadly stable over the near to medium term, driven by strong net FX liquidity.
Cordros
