Global Economy
According to the Bureau of Labor Statistics (BLS), United States headline inflation rose to a seven-month high in January, increasing by 10bps to 3.0% y/y in January (December: +2.9% y/y). We attribute the inflationary pressures mainly to the upward pressure in energy prices highlighted by the softer declines in gasoline (-0.2% y/y vs December: -3.4% y/y) and fuel oil (-5.3% y/y vs December: -13.3% y/y) prices. Meanwhile, food prices were steady at 2.5% y/y relative to December as higher costs of food at home (+1.9% y/y vs December: +1.8% y/y) balanced the slower prices of food away from home (+3.4% y/y vs December: +3.6% y/y).
On a month-on-month basis, the headline inflation rose by 0.5% m/m in January (December: +0.4% m/m). Given the higher energy prices and strong consumer demand, we expect the inflationary pressures to remain elevated in the short to medium term. Considering the sticky inflation and uncertainties surrounding Trump’s proposed policies – such as tariffs, deportations, and tax cuts – we expect the Fed to maintain the funds rate at its current level over the short to medium term. Indeed, the CME FedWatch tool now indicates a 97.5% probability of a “HOLD” decision at the 19 March meeting.
According to the Office for National Statistics (ONS), the United Kingdom’s real GDP grew by 0.1% q/q in Q4-24 (Q3-24: +0.0% q/q). We highlight that the improvement in the review period primarily reflects an upturn in government expenditure (+0.2% q/q vs Q3-24: +0.1% q/q) due to increased expenses on public expenditure and defence, while gross fixed capital formation (-0.2% q/q vs Q3-24: +0.2% q/q) declined due to subdued transport expenses.
Elsewhere, private consumption (0.0% q/q vs Q3-24: +0.4% q/q) was flat as consumer demand remained weak. On a year-on-year basis, GDP increased by 1.4% in Q4-24 (Q3-24: 1.0% y/y). While we expect weak demand, higher energy prices and slower global trade due to US tariffs to weigh on growth prospects, we anticipate that the UK economy will remain resilient over the short to medium term, supported by improving consumer confidence, further strengthened by expectations of an additional interest rate cut by the Bank of England (BoE). Accordingly, the IMF projects the economy to grow by 1.6% y/y in 2025FY (2024E: +0.9% y/y).
Global Equities
Global stock markets rallied this week, fueled by optimism over delayed US tariff implementation, Russia-Ukraine peace talks, stronger-than-expected UK GDP data, and a fresh round of corporate earnings, which outweighed concerns over hot US inflation data. Accordingly, US equities (DJIA: +0.9%, S&P 500: +1.5%) are on track to close the week higher as investors reacted positively to the delayed implementation of President Trump’s tariff plan and strong corporate earnings from Coca-Cola, Cisco, and Shopify, which offset concerns over the stronger-than-expected inflation (CPI and PPI) print.
Similarly, European equities (STOXX Europe: +2.0%, FTSE 100: +0.7%) were poised to close the week on a positive note, buoyed by optimism on Russia-Ukraine peace talks, alongside a stronger-than-expected UK GDP report and upbeat earnings from Heineken, ABN AMRO, and Nestlé. Elsewhere, Asian equities (Nikkei 225: +2.0%, SSE: +1.6%) mirrored global trends, further supported by optimism over AI advancements in China and strong earnings in Japan. Meanwhile, Emerging and Frontier Markets (MSCI EM: +0.4%, MSCI FM: +1.3%) closed higher, driven by gains in China (+1.1%) and Morocco (+0.4%), respectively.
Nigeria: Domestic Economy
According to the Nigerian Upstream Petroleum Regulatory Commission (NUPRC), Nigeria’s crude oil production (including condensates) in January increased by 4.2% m/m to 1.74 mb/d (December: 1.67 mb/d), its highest level since March 2021. The improvement in domestic crude oil production can be attributed to the enhanced oil pipeline surveillance in line with the FG’s efforts to boost oil production and the development of new oil fields. We highlight that oil production increased at the Escravos (+14.6% m/m), Qua Iboe (+11.6% m/m), Bonny (+4.6% m/m), Forcados (+4.3% m/m), Agbami (+3.4% m/m) and Tulja – Okwuibome (+0.4% m/m) production terminals. Conversely, the Odudu (-5.0% m/m) and Brass (-3.2% m/m) terminals experienced declines.
Looking ahead, we expect that the combination of improved security measures and a gradual increase in sector investments will sustain production above the 1.60 mb/d threshold in the medium term. However, we believe output will likely remain below the FG’s target (2.06 mb/d) primarily due to the still suboptimal investment in the sector. Overall, in line with recent trends, we raise our oil production forecast to an average of 1.68mb/d (Prev.: 1.65mb/d) in 2025E (2024FY: 1.56mb/d).
According to the National Communications Commission (NCC), the total active telephony subscribers increased by 3.2% m/m to 164.93 million in December 2024 (November 2024: 159.85 million). The increase reflects the gradual recovery in the subscriber base following the conclusion of the NIN-SIM linkage program by mobile service providers in September.
Analysing the market share by operators, MTN Nigeria led by 51.4% with 84.61 million subscribers, Airtel Nigeria followed with 34.4% (56.62 million subscribers), Globacom with 12.2% (20.14 million subscribers) and 9mobile with 2.0% (3.28 million subscribers). At the same time, the total number of internet subscribers rose by 2.0% m/m to 139.28 million in December (November: 136.54 million).
On a year-on-year basis, the average telephony subscribers declined by 18.6% to 181.76 million (2023FY average: 223.17 million), while the average number of internet subscribers declined by 9.2% to 144.81 million (2023FY average: 159.49 million) highlighting the resultant disconnections of SIMs that are not linked to verifiable NINs and the rectification of major discrepancies by mobile network operators. Looking ahead, we expect subscriber base recovery through SIM reactivation initiatives, especially from market leaders – MTN Nigeria and Airtel Nigeria. Given the essentiality of telecoms service, we do not expect the recent 50.0% tariff hike to impact the subscriber base.
Capital Markets: Equities
The Nigerian equities market maintained a bullish trajectory this week, with gains in three of five trading sessions primarily driven by buying interest in DANGCEM (+21.8%), as well as strong performances in TRANSCORP (+11.1%), MTNN (+3.6%), and TRANSCOHOT (+10.0%). As a result, the All-Share Index advanced by 2.0% to 108,053.52 points, bringing the month-to-date and year-to-date returns to +3.4% and +5.0%, respectively. However, trading activity weakened, as total trading volume and value declined by 21.6% w/w and 43.9% w/w, respectively. Sectoral performance was mixed, as the Industrial Goods (+10.4%) and Insurance (+2.5%) indices advanced, while the Consumer Goods (-3.6%), Oil & Gas (-2.3%) and Banking (-0.2%) indices settled lower.
Next week, we expect market sentiment to be driven by more corporate earnings updates as well as key economic data releases and policy decisions, with a particular focus on January inflation figures and CBN’s monetary policy decision.
Money Market and Fixed Income
The overnight (OVN) rate expanded by 5bps w/w to 32.8% as OMO auction debits (NGN1.40 trillion) outweighed inflows from FGN bond coupon payments (NGN283.11 million). As a result, the average system liquidity weakened, settling at a net short position of NGN1.08 trillion (vs a net short position of NGN195.37 billion in the previous week).
In the coming week, we believe that the inflows from OMO maturities (NGN10.00 billion) will be insufficient to boost system liquidity. As such, we expect the OVN rate to remain elevated.
Treasury Bills
The Treasury bills secondary market was bullish this week despite the tight interbank liquidity. We attribute this to investors’ expectations of a lower January CPI print and a likely HOLD decision at the upcoming MPC meeting, which in turn is expected to drive a moderation in rates. Consequently, the average yield declined by 51bps to 24.1%. Across market segments, the average yield declined by 45bps and 67bps to 22.1% and 26.4% at the NTB and OMO secondary markets, respectively.
Notably, the CBN floated an OMO auction on Thursday, offering instruments worth NGN600.00 billion – NGN300.00 billion for the 355D and NGN300.00 billion for the 362D. Total subscription settled at NGN1.92 trillion (bid-to-offer: 3.2x), with the CBN allotting NGN1.40 trillion – NGN402.85 billion for the 355D and NGN993.00 billion for the 362D – at respective stop rates of 21.32% and 21.45%.
Based on our expectations of a liquidity dearth next week, we expect yields in the Treasury bills secondary market to trend higher.
Bonds
Activities in the FGN bond secondary were bullish, driven by interests in short- and mid-dated papers due to expectations of a decline in rates. Hence, the average yield inched higher by 28bps to 20.3%. Across the benchmark curve, the average yield decreased at the short (-39bps), mid (-22bps), and long (-2bps) segments following demand for the JAN-2026 (-110bps), JUL-2030 (-40bps) and JUN-2053 (-18bps) bonds, respectively.
Next week, we expect the release of January’s CPI data to influence the direction of market activities. Meanwhile, we also maintain our medium-term expectation of a moderation in yields consequent on (1) anticipated direction of monetary policy administration, and (2) slower borrowing pace by the Federal Government.
Foreign Exchange
The naira depreciated by 0.5% to NGN1,509.70/USD at the Nigerian Foreign Exchange Market (NFEM) even as the CBN intervened, selling c. USD66.45 million to authorized dealers. Notably, the country’s FX reserves maintained its downward trend, declining by USD307.19 million w/w to USD39.10 billion (13 February). In the forwards market, the naira rates decreased across the 1-month (-0.3% to NGN1,554.01/USD), 3-month (-0.6% to NGN1,633.36/USD), 6-month (-1.0% to NGN1,749.31/USD) and 1-year (-1.1% to NGN1,948.97/USD) contracts.
In the near term, we expect FX market liquidity to remain strong, driven by inflows from foreign portfolio investors (FPIs), supported by attractive carry trade opportunities and a relatively stable naira. However, global uncertainties, including the ripple effects of US trade tariffs, pose a significant risk. Additionally, we anticipate that the CBN will maintain its interventions, particularly during periods of liquidity shortages. As a result, we foresee the naira holding steady in the short term.
