Global Economy
According to the Bureau of Economic Analysis (BEA), the US economy expanded by 1.4% q/q in Q4-25 (Q3-25: 4.4% q/q), falling significantly below market expectations of 3.0% q/q. The deceleration was primarily driven by a moderation in household consumption and a contraction in government spending despite improvements in business investment. Specifically, household consumption growth slowed to 2.4% q/q (Q3-25: +3.5% q/q), reflecting a decline in goods consumption and more subdued expansion in services.
In addition, government expenditure contracted by 5.1% q/q (Q3-25: +2.2% q/q), largely reflecting reduced federal outlays across both defence and non-defence categories amid the government shutdown, which disrupted budget execution and temporarily curtailed discretionary spending during the quarter. Conversely, private investment (+3.8% q/q vs 0.0% q/q) rebounded after stagnating in the previous quarter, supported by stronger activity across both residential and non-residential segments.
On a year-on-year basis, real GDP growth slowed to 2.2% in Q4-25 (Q3-25: +2.3% y/y), bringing it full year growth to 2.2% y/y in 2025FY. Despite the near-term fiscal drag from the shutdown, we expect US growth momentum to remain broadly resilient as delayed public sector activity normalises and accumulated demand is gradually cleared. More fundamentally, sustained capital expenditure in technology and innovation, particularly in AI-related infrastructure and productivity enhancing investments, alongside a still resilient labour market, is expected to support continued expansion. This outlook is consistent with the IMF’s 2026 growth forecast of 2.4% y/y, which underscores the underlying structural resilience of the US economy despite episodic policy disruptions.
According to the Office for National Statistics (ONS), headline inflation in the UK slowed to a ten-month low at +3.0% y/y in January (December: +3.4% y/y) – and in line with market expectations. Notably, the deceleration was primarily driven by softer growth in the food and services components compared with the prior month. More specifically, food inflation moderated sharply to a nine-month low of 3.6% y/y (December: 4.5% y/y), due to lower prices across categories such as bread, cereals, and meat. Similarly, services inflation eased to 4.4% y/y (December: 4.5% y/y), reflecting lower costs for gas, housing, and utilities.
Elsewhere, core inflation, which excludes food and energy, declined to 3.1% y/y (December: +3.2% y/y), its lowest reading since August 2021, indicating a gradual moderation in underlying price pressures. On a month-on-month basis, consumer prices fell notably to -0.5% y/y (December: +0.4% m/m). In the near term, we expect UK inflation to remain on a gradual disinflationary path, supported by easing food and core price pressures. However, sticky services inflation and potential energy-related volatility could slow the pace of further moderation. Against this backdrop, we expect the Bank of England to deliver a cautious 25bps rate cut at its next meeting, while maintaining a data-dependent stance.
Global Market
Global equities lacked clear direction this week, as investors weighed mixed macro signals, persistent geopolitical risks in the Middle East, and ongoing uncertainty around the longer-term implications of AI-driven disruption. In the US, markets were bifurcated as the S&P 500 (+0.4%) and NASDAQ 100 (+0.5%) were on course to finish higher, supported by selective positioning in AI leaders, while the Dow Jones Industrial Average (DIJA: -0.5%) lagged amid hawkish Federal Reserve minutes, higher-than-expected PCE inflation, and softer GDP data.
European equities (STOXX Europe +1.6%; FTSE 100 +2.7%) advanced, as weaker eurozone industrial output and cooler UK inflation reinforced expectations for policy easing from the ECB and BoE, respectively. In Japan, the Nikkei 225 (-0.2%) edged lower following a weaker-than-expected GDP print and continued sector-level concerns tied to AI disruption. Meanwhile, Chinese equities (SSE: 0.0%) were broadly flat due to the Lunar New Year holiday period. Elsewhere, emerging markets (MSCI EM: -0.5%) declined, driven largely by losses in India; while frontier markets (MSCI FM: -0.0%) closed the week flat.
Domestic Economy
According to the National Bureau of Statistics (NBS), headline inflation moderated to 15.10% y/y in January (December: 15.15% y/y). The softer reading was primarily driven by a sharp fall in food prices and a slowdown in core inflation. Specifically, the food index returned to the single-digit territory, tapering by 195bps to 8.90% y/y (December: 10.84% y/y), primarily driven by a notable decline in the farm produce and imported food basket. Core inflation eased by 91bps to 17.72% y/y (December: 18.63% y/y), reflecting a decrease in prices across the goods, transportation, information and communication and insurance and financial services subcomponents.
On a month-on-month basis, headline inflation marked a sharp reversal from the prior month’s increase, contracting by 2.88% (December: +0.54% m/m). Looking ahead, we anticipate a modest month-on-month increase in inflation to 1.38% in February, largely driven by firmer farm produce prices and moderate upticks in energy costs. Nonetheless, underlying price pressures are expected to remain broadly contained, supported by the recent appreciation of the naira, which should help temper exchange rate pass-through into domestic prices. Consequently, we project headline inflation to ease to 14.35% in February, underpinned by a favourable base effect.
Based on the data from the Nigerian Upstream Petroleum Regulatory Commission (NUPRC), Nigeria’s crude oil production (including condensates) reversed the decline recorded in the previous month, rising by 5.4% m/m to 1.63 mb/d in January (December: 1.54 mb/d), its highest level since Aug-25. We attribute the outturn primarily to a rebound (+37.5% m/m) in condensate production to 0.17 mb/d (December: 0.12 mb/d), alongside the 2.6% m/m increase in crude oil output to 1.46 mb/d (December: 1.42 mb/d).
Notably, the gains across the Agbami (+363.3% m/m), Tulja-okwuibome (+12.6% m/m), Brass (+4.8% m/m), and Escravos (+2.8% m/m) terminals offset the declines in the Qua Iboe (-10.1%m/m), Bonny (-8.4% m/m), Forcados (-5.8% m/m), Bonga (-2.6% m/m) and Odudu (-1.4% m/m) terminals. We highlight that the Cawthorne terminal – a floating storage and offloading (FSO) vessel commissioned in Oct-25 – has commenced operations, contributing 0.38 mb/d to total output. Looking ahead, crude oil production is expected to increase in the near term, underpinned by higher investment, improved security conditions, and the integration of new oil fields and evacuation routes. However, intermittent terminal shutdowns, partly reflecting persistent infrastructure constraints, remain a key downside risk. Overall, we project average oil production of 1.80 mb/d in 2026E.
Capital markets: Equities
The domestic stock market maintained a bullish trajectory this week, recording gains in four of five trading sessions. The rally was primarily driven by strong buying interest in MTNN (+10.0%), DANGCEM (+10.1%), BUAFOODS (+5.8%), BUACEMENT (+9.4%) and SEPLAT (+8.3%) as investors positioned ahead of their 2025FY earnings releases due next week. As a result, the All-Share Index advanced by 7.1% to 194,989.77 points, bringing the month-to-date and year-to-date returns to +17.9% and +25.3%, respectively. Market participation also improved with total trading volume and value increasing by 148.4% w/w and 87.1% w/w, respectively. Sectoral performance was broadly in line with the overall market sentiment, as the Industrial Goods (+10.1%), Oil & Gas (+8.7%), Consumer Goods (+6.1%), Banking (+5.7%) and Insurance (+4.7%) indices advanced.
Next week, market sentiment will likely be shaped by audited earnings releases and dividend declarations across key sectors including Cement, Telcos, Oil & Gas, and Consumer Goods. Market participants will also monitor the CBN’s MPC meeting, where we expect the CBN to reduce the policy rate by 50bps to 26.5%.
Money Market and Fixed Income
The OVN rate declined by 7bps to 22.8%, as the strong liquidity in the system, supported by NGN1.87 trillion in inflows from OMO maturities, outweighed NGN3.65 trillion in OMO debits. Consequently, average system liquidity remained stellar at an average net long position of NGN2.94 trillion (prior week: NGN3.64 trillion).
In the absence of any liquidity sterilisation next week, anticipated inflows of NGN725.70 billion from OMO maturities and NGN537.39 billion from FGN bond coupon payments should significantly enhance system liquidity, potentially weighing on the overnight rate.
Treasury Bills
The Treasury bills secondary market was bullish this week, driven by a still robust system liquidity. Accordingly, the average yield across all instruments declined by 34bps to 19.3%. Across segments, average NTB yields declined by 10bps to 17.5%, while average OMO yields declined strongly by 65bps to 20.5%. At Wednesday’s NTB primary market auction, the DMO offered NGN1.15 trillion across tenors, attracting robust demand with total subscriptions of NGN4.28 trillion, translating to a bid-to-offer ratio of 3.7x. The DMO ultimately allotted NGN1.91 trillion, implying a bid-to-cover ratio of 2.2x. Stop rates declined on the 91-Day tenor by 4bps to 15.80% and on the 364-Day tenor by 109bps to 15.90%, while the 182-Day tenor was left unchanged at 16.65%.
Also, the CBN conducted an OMO auction with NGN600.00 billion on offer across the 8‑Day and 99‑Day tenors. Eventually, a total sale of NGN1.35 trillion was made with stop rates clearing at 22.39% and 19.48%, respectively. The CBN conducted another OMO auction offering NGN600.00 billion across the 7‑Day and 105‑Day tenors. Consequently, NGN2.30 trillion was issued on the 105‑Day tenor alone at a 19.44% discount stop rate.
Given our expectation of robust system liquidity, we anticipate yields in the Treasury bills secondary market to moderate.
Bonds
The FGN bond market rallied as investors reacted to the CBN’s decision to issue OMO bills with significantly shorter tenors of 99 days versus the prior 350-day instruments, which signalled a reduced supply of longer-duration paper and reignited appetite for duration. The move was reinforced by a softer CPI print, which tilted expectations toward a more accommodative policy stance and strengthened demand across the curve. Accordingly, the average yield declined by 9bps to 16.0%.
Across the curve, the average yield increased at the short (+3bps) end following sell pressures on the FEB-2031 (+10bps) bond, while it declined at the mid (-21bps) segment driven by demand for the JUN-2033 (-36bps) bond. Meanwhile, it remained unchanged at the long end. Notably, the DMO released the FGN bond calendar scheduled to hold next Monday (February 23), offering NGN800.00 billion across the JUN-2032, MAY-2033, and FEB-2034 bonds.
We expect trading activities next week to be influenced by the FGN bond auction scheduled for next Monday. Over the medium to long term, FGN bond yields are likely to pare, driven by the growing anticipation of a dovish policy tilt and the sturdy liquidity in the financial system.
Foreign Exchange
The naira appreciated this week by 1.5% w/w to NGN1,340.45/USD, supported by strong offers from FPIs looking to participate in the OMO PMA. Notably, the level of supply was significant, prompting the Central Bank to intervene by buying USD84.20 million from the market. Also, the gross FX reserves increased this week by USD691.70 million w/w to USD48.50 billion (February 17), marking the ninth consecutive week of accretion. In the forwards market, the naira rates appreciated across the 1-month (+0.8% to NGN1,368.37/USD), 3-month (+0.9% to NGN1,404.58/USD), 6-month (+0.8% to NGN1,454.08/USD) and 1-year (+1.0% to NGN1,548.63/USD) contracts.
Looking ahead, we expect foreign investor appetite for Nigeria’s capital market to remain robust, underpinned by a relatively weaker dollar, supportive macroeconomic backdrop, enhanced market efficiency, and elevated naira yields. These factors should continue to underpin capital inflows and FX liquidity, while rising external reserves provide the CBN with adequate buffers to stabilise the naira during periods of volatility. Consequently, we expect the naira to remain firm in the near term.
