Global Economy
According to the Bureau of Labour Statistics (BLS), US headline inflation was unchanged at +2.7% y/y in December, in line with market expectations. The outturn reflected moderation in energy prices, which offset a pickup in food inflation.
Specifically, energy prices increased at a markedly slower pace (+2.3% y/y vs November: +4.2% y/y), driven by softer gasoline and fuel oil prices. In contrast, food inflation climbed to +3.1% y/y, from an eight-month low of +2.6% y/y in November, reflecting higher prices for both food at home (+2.4% y/y vs November: +1.9% y/y) and food away from home (+4.1% y/y vs November: +3.7% y/y). Elsewhere, core inflation remained unchanged at +2.6% y/y—its lowest level since 2021— as higher apparel prices were offset by moderation in new vehicle prices.
On a month-on-month basis, the headline inflation edged up to +0.3% m/m (September to November: +0.2% m/m). Looking ahead, even as headline inflation remains steady at 2.7% y/y, persistent price pressures – particularly food – suggest that the disinflationary process may be slower than anticipated. With core inflation holding firm despite softer energy prices, inflation is likely to remain broadly stable in the near term, easing gradually rather than moving decisively toward the Fed’s target.
According to the United States Department of Labour, initial jobless claims fell by 9,000 to 198,000 in the week ended 10 January, down from 207,000 in the prior week, undershooting market expectations of an increase to 225,000. The data reinforces the view that the US labour market remains resilient, easing concerns around a near-term, abrupt economic slowdown.
On a non-seasonally adjusted basis, the largest declines were recorded in New York (-4,382), Washington (-2,955) and Oregon (-2,821), while the most significant increases came from Texas (+7,902), California (+5,471), and Michigan (+3,872). Similarly, the 4-week moving average eased by 6,500, bringing it to 205,000 from the previous week’s reading of 211,500, reinforcing the broadly stable trend in claims. In the near term, the US labour market is likely to remain resilient, with low and stable jobless claims pointing to limited layoffs and sustained labour demand. While some regional adjustments are evident, they do not yet signal a broad-based softening, suggesting that any easing in labour market conditions is likely to be gradual rather than abrupt.
Global Market
Global equity markets traded on a mixed note as investors navigated a confluence of conflicting macroeconomic signals, corporate earnings releases, and persistent geopolitical uncertainties. At the time of writing, US equities (DJIA: -0.1%; S&P 500: -0.3%) were set to close the week lower, as market participants digested mixed earnings outcomes from major banks alongside softer-than-expected December inflation data. In contrast, European markets advanced, with major indices (STOXX 600: +0.8%; FTSE 100: +1.1%) buoyed by stronger-than-expected UK GDP growth and rising metal prices, which rekindled investor interest in mining stocks.
Elsewhere, Asian equities traded mixed, with Japanese stocks (Nikkei 225: +3.8%) advancing on expectations of more expansionary fiscal policy. Conversely, Chinese equities (SSE: -0.6%) closed lower, pressured by profit taking in high-performing defense and technology stocks, alongside tighter margin requirements after regulators raised the minimum margin for A-share financing to 100% from 80%. Emerging and Frontier markets (MSCI EM: +1.8%; MSCI FM: +0.1%) posted modest gains, led primarily by advances in India (+0.5%) and Vietnam (+1.5%), respectively.
Domestic Economy
The National Bureau of Statistics (NBS) revised the 2025 inflation series to normalise the anticipated technical spike in December associated with the earlier CPI rebasing exercise, adopting the 12-month average for 2024 as the index reference period, rather than December 2024, as used in the initial rebase, to better capture the underlying price trend over the period.
Accordingly, headline inflation moderated for the tenth consecutive month, easing by 218bps to 15.15% y/y in December (November: 17.33% y/y). The moderation was primarily driven by a sharp fall in food prices and core inflation. Specifically, food prices tapered by 336bps to 10.84% y/y (November: 14.21% y/y), primarily driven by a notable decline in the farm produce basket, supported by the extension of the main harvest period. Core inflation eased by 196bps to 18.63% y/y (November: 20.59% y/y), reflecting a slower price increase across transport, health, miscellaneous goods & services, restaurants and accommodation services, alcoholic beverages, tobacco, and utilities sub-categories.
On a month-on-month basis, headline inflation moderated by 69bps to 0.54% (November: 1.22% m/m). We expect the sustained exchange rate stability and softer refined petroleum prices to ease imported and energy-related inflation pressures, while weaker post-festive demand should temper food price risks. Consequently, we expect headline inflation to slow to 0.37% m/m in January, though adverse base effects may temporarily lift the y/y rate to 18.95% before a sharp deceleration in subsequent months.
Based on FMDQ data, total inflows into the Nigerian Foreign Exchange Market (NFEM) rose by 17.5% m/m to USD3.37 billion in December (November: USD2.87 billion). The improvement was primarily due to increases across inflows from local sources (74.9% of total inflows) and foreign sources (25.1% of total inflows).
Specifically, inflows from local sources increased by 24.2% m/m to USD2.52 billion in December (November: USD2.03 billion) driven by increase in inflows from the CBN (+51.7% m/m), individuals (+36.9% m/m), and exporters/importers (+32.8% m/m) segments, amid a decline in the non-bank corporates (-8.9% m/m) segment.
At the same time, inflows from foreign sources increased marginally by 1.2% m/m to USD847.40 million (November: USD837.10 million), due to higher accretions from the FDI (+102.4% m/m) and other corporate (+40.2% m/m) segments, while inflows from the FPI (-7.9% m/m) segment dropped. Overall, total inflows into the NFEM in 2025 increased by 62.9% y/y to USD50.67 billion (2024: USD31.11 billion), underpinned by relatively higher exports, improved market confidence and attractive carry-trade opportunities. Looking ahead, we expect inflows from both domestic and foreign sources to remain robust, supported by rising exports, sustained market confidence and still attractive carry-trade opportunities.
Capital Markets
The domestic equity market sustained its bullish momentum this week, driven by strong gains in MTNN (+5.5%), SEPLAT (+8.6%), FIRSTHOLDCO (+12.3%), TRANSCORP (+9.3%), and NESTLE (+10.0%). As a result, the All-Share Index closed higher by 2.4% w/w to 166,154.55 points, with the year-to-date returns extending to +6.8%.
On market activity, trading volume and value increased by 34.5% and 75.5% w/w, respectively. Sector performance was broadly positive, as the Oil & Gas (+5.7%), Banking (+3.4%), Insurance (+1.8%), Consumer Goods (+1.6%), and Industrial Goods (+0.7%) indices all closed the week higher.
Looking ahead, bullish momentum is expected to extend into the coming week, supported by the commencement of early corporate earnings releases. Nonetheless, we do not rule out intermittent profit taking as investors tactically rebalance portfolios, particularly against the backdrop of evolving yield and liquidity conditions.
Money Market and Fixed Income
The OVN rate tapered by 10bps to 22.7%, supported by NGN810.10 billion in OMO maturity inflows. As a result, average system liquidity steadied at a net long position of NGN2.00 trillion (prior week: NGN2.05 trillion).
In the absence of any mop-up activities by the apex bank, inflows from OMO maturities (NGN1.31 trillion) and FGN bond coupon payments (NGN260.51 billion) are expected to bolster system liquidity, translating to downside pressure on the OVN rate.
Treasury Bills
Despite the liquidity influx, the Treasury bills secondary market traded with bearish sentiments, broadly reflecting persistent supply overhang. Consequently, the average yield across all instruments increased by 45bps to 20.3%. Across segments, average NTB yields increased by 11bps to 18.1%, while average OMO yields increased by 76bps to 22.4%.
Next week, yields in the Tbills market are likely to trend higher, as the DMO is set to offer NGN1.15 trillion in bills at Wednesday’s NTB auction (21 January). Anticipation of the sizeable primary market supply is expected to keep secondary market trading bearish, as investors redirect demand towards the auction in search of higher stop rates.
Bonds
Average FGN bond yields also increased by 13bps to 16.9%, mirroring broader market dynamics. Across the curve, the average yield increased at the short (+14bps), mid (+12bps), and long (+12bps) segments driven by sell pressures on the JAN-2026 (+91bps), APR-2032 (+41bps), and JUN-2038 (+57bps) bonds, respectively.
The FGN bond market is expected to remain bearish next week, driven by continued upward repricing of yields.
Foreign Exchange
The naira depreciated this week by 0.1% w/w to NGN1,418.28/USD as demand pressures emerged. Also, the gross FX reserves increased this week by USD156.40 million w/w to USD45.82 billion (January 14). In the forwards market, the naira rates appreciated across the 1-month (+1.0% to NGN1,444.96/USD), 3-month (+0.7% to NGN1,490.77/USD), 6-month (+1.3% to NGN1,545.97/USD) and 1-year (+1.5% to NGN1,661.55/USD) contracts.
We expect the naira to remain broadly stable in the near term, supported by a favourable external position characterised by a sustained current account surplus and strong foreign exchange reserves. We expect continued investor confidence, alongside elevated naira yields, to underpin steady capital inflows, further anchoring exchange rate stability.
