Global Economy
According to the United States’ Bureau of Labor Statistics (BLS), consumer prices in the world’s largest economy dropped to a 6-month low in March, easing by 40bps to 2.4% y/y (February: 2.8% y/y) – below market expectations (2.6% y/y). We highlight that the price moderation is a firm reflection of a slowdown in energy inflation (-3.3% y/y vs February: -0.2% y/y) due to lower gasoline and fuel oil following the slump in crude oil prices. At the same time, core inflation (+2.8% y/y vs February: +3.1% y/y) slowed to a 48-month low in line with the deceleration in prices for shelter, used cars & trucks, transport services, medical care commodities, and apparels.
However, food prices (+3.0% y/y vs February: 2.6% y/y) increased to the highest level in 16 months following the price surge across the food away from home (+3.8% y/y vs February: +3.7% y/y) and food at home (+2.4% y/y vs February: 1.9% y/y) baskets. On a month-on-month basis, headline inflation declined by 0.1% y/y in March (February: +0.2% m/m). Looking ahead, we anticipate headline inflation to remain above the 2.0% target in the short term, driven by the cascading effect of tariffs imposed by the Trump administration, which we believe will further heighten inflationary risks. However, weaker oil prices will remain an upside for US inflation.
Recent data published by the National Bureau of Statistics showed that China’s headline inflation declined by 0.1% y/y in March (February: -0.7% y/y) – missing market expectation of a 0.1% y/y increase. Notably, the pace of contraction weakened in the review period mainly due to robust demand and higher pork prices. Parsing through the breakdown provided, food prices declined at a slower pace in March ( -1.4% y/y | February: -3.3% y/y), as pork prices (+6.7% y/y vs February: +4.1% y/y) and the costs of fresh fruits (+0.9% y/y vs February: -1.8% y/y) increased.
Meanwhile, non-food inflation increased by 0.2% y/y (February: -0.1% y/y), highlighting improving supply-demand dynamics and the ongoing effects of pro-growth policies aimed at stimulating domestic consumption. As a result, prices expanded across the housing, education, and healthcare sub-baskets. On a month-on-month basis, headline inflation declined by 0.4% (February: -0.2% m/m). Looking ahead, deflation risks are expected to persist in China, amid global uncertainties and rising trade tensions with the US, reinforcing the case for further monetary easing.
Global Market
In the week under review, global equities remained negative, with heavy losses at the top of the week, as investors remained wary of risky assets as the trade war between the US and its trade partners (particularly China) intensified. At the time of writing, US equities (DJIA: +3.3%; S&P 500: +3.8%) were on track to close the week higher. However, the broad-based optimism in the global markets (on accounts of President Trump’s 90-day tariff pause) faded late in the week as markets turned risk-off following renewed fears of a re-escalation in US-China trade tensions.
Similarly, European equities (STOXX Europe 600: -1.4%; FTSE 100: -1.2%) were poised to log a third consecutive week of loss, as investors refocused on the broader risks stemming from the deepening US-China trade pressure. Asian equities (Nikkei 225: -0.6%; SSE: -3.1%) carried on last week’s bearish momentum, as the potential economic fallout from the escalating US-China trade conflict remained on the front burner. Emerging and Frontier markets were also not spared, as the MSCI EM (-5.4%) and MSCI FM (-1.6%) indices tapered, reflecting losses in China (-3.1%) and Romania (-1.5%), respectively.
Nigeria: Domestic Economy
According to the Debt Management Office (DMO), Nigeria’s public debt increased by 1.6% q/q to NGN144.67 trillion in Q4-24 (Q3-24: NGN142.32 trillion). We attribute the increase to new borrowings to finance rising government expenditures against persistent revenue underperformance, as the naira becomes relatively stable. Notably, the external (48.6% of the total public debt) and domestic (51.4% of total public debt) debt stock both experienced increases.
Specifically, the country’s total external debt increased by 6.4% q/q to USD45.78 billion (vs +0.3% q/q to USD43.03 billion in Q3-24), reflecting additional borrowings from the African Development Bank (USD508.66 million), World Bank (USD485.05 million), amid IMF loan repayments (USD446.96 million). In naira terms, total external debt rose by 2.0% q/q to NGN70.29 trillion (Q3-24: NGN68.89 trillion) using an average exchange rate value of NGN1,535.32/USD in Q4-24, compared to NGN1,601.02/USD in Q3-24.
At the same time, domestic debt stock rose by 1.3% q/q to NGN74.38 trillion (Q3-24: NGN73.43 trillion). Total debt on a year-on-year basis grew by 148.6%, pushing the country’s debt-to-GDP ratio to 53.7%. Looking ahead, total debt is expected to increase further due to (1) high government borrowings to fund the 2025 budget deficit (Cordros estimate: NGN14.58 trillion) and (2) the impact of naira depreciation on external debt. We project total public debt to settle at NGN163.65 trillion (or 53.8% of GDP) in 2025E.
The Purchasing Manager’s Index (PMI) printed above the 50-point threshold for the fourth consecutive month, indicating sustained expansion of business activities in the Nigerian economy. According to CBN, the composite PMI expanded to 52.3 points in March (February: 51.4 points), driven by broad-based increases in output across the agriculture, industry, and service sectors. Specifically, the agriculture sector PMI (54.7 points vs February: 53.1 points) expanded to an eight-month high, supported by an improvement in general farming activities.
The Industry PMI (51.5 points vs February: 50.5 points) expanded due to improved activities in the Transportation equipment, Furniture & related products and Fabricated metal products subsectors. Elsewhere, the Services sector PMI (51.5 points vs February: 51.0 points) expanded slightly, reflecting resilient activities across the Finance & Insurance, Educational services and Professional, Scientific & Technical services sub-sectors. Looking ahead, we anticipate a sustained expansion of private sector activities, driven by improving macroeconomic conditions such as naira stability and easing inflationary pressures. However, persistently tight financial conditions may dampen economic activity in the short term, pending a shift towards a more accommodative monetary policy stance.
Capital Markets: Equities
In the Nigerian equities market, investors retained a cautious approach, with risk-off sentiments remaining dominant. Factors including the ongoing global trade tensions and decline in oil prices sparked selling activity on the bourse. Specifically, sell pressures on MTNN (-4.1%), TRANSCORP (-8.4%), ACCESSCORP (-9.7%), UBA (-4.2%), ETI (-8.7%), GTCO (-2.0%), OANDO (-7.1%) and FIRSTHOLDCO (-3.9%) drove the All-Share Index lower by 0.9% w/w to 104,563.34 points, with the month-to-date and year-to-date returns moderating to -3.0% and +1.6%, respectively. Meanwhile, trading volume and value increased by 76.7% w/w and 84.0% w/w, respectively. Sectoral performance was negative, as the Insurance (-4.6%), Banking (-2.2%), Consumer Goods (-0.6%), Oil & Gas (-0.5%), and Industrial Goods (-0.3%) indices all ended the week lower.
Looking ahead, we expect market sentiment to be influenced by (1) developments in the global economy, (2) investor reactions to the upcoming March inflation report, and (3) the direction of yields in the fixed income market.
Money Market and Fixed Income
The overnight (OVN) rate expanded by 10bps w/w to 27.0%, driven by debits for market funded FX purchases from the CBN (c. NGN220.00 billion). Consequently, the average system liquidity weakened (albeit remaining in the positive terrain), settling at a net long position of NGN425.84 billion (vs a net long position of NGN1.33 trillion in the previous week).
Next week, barring any liquidity tightening measures by the CBN, we expect inflows from FGN bond coupon disbursements (NGN183.07 billion) to boost system liquidity, likely driving a moderation in the OVN rate.
Treasury Bills
The Treasury bills secondary market traded with bearish sentiments as the average yield expanded by 279bps to 24.9%. We attribute this to FPI-triggered selloffs amid the ongoing trade tensions . Across the market segments, the average yield advanced by 119bps and 492bps to 21.1% and 29.3% in the NTB and OMO segments, respectively. At Wednesday’s NTB auction, the CBN offered bills worth NGN800.00 billion – NGN50.00 billion for the 91D, NGN100.00 billion for the 182D, and NGN650.00 billion for the 364D bills.
Subscription level settled higher at NGN1.13 trillion (previous auction: NGN1.43 trillion), indicating a bid-to-offer ratio of 1.4x (previous auction: 2.0x). The auction closed with the CBN under-allotting to the tune of NGN424.58 billion – NGN111.81 billion for the 91D, NGN105.79 billion for the 182D, and NGN206.98 billion for the 364D papers – at respective stop rates of 18.50% (previous: 18.00%), 19.50% (previous: 18.50%) and 19.63% (unchanged).
Given our expectations for an improved system liquidity in the coming week, we anticipate a commensurate improvement in the demand for bills, effectively causing yields to taper, albeit slightly.
Bonds
Proceedings in the FGN bond secondary market were bearish as the average yield expanded by 17bps to 18.9%. We attribute this to sustained risk-off sentiments among offshore/onshore investors, driven by concerns over Trump’s tariff policies, and lingering debt sustainability concerns (amid weaker oil prices). Across the benchmark curve, the average yield increased at the short (+19bps) and mid (+3bps) segments following selloffs of the JAN-2026 (+45bps) and FEB-2031 (+64bps) bonds, respectively, while it closed flat at the long end.
Over the medium term, we expect a moderation in bond yields, influenced by two factors – (1) the anticipated dovish monetary policy stance and (2) sustained improvement in demand and supply fundamentals in Q2-25.
Foreign Exchange
The naira experienced volatility during the week as demand pressures persisted. Nonetheless, the robust intervention by CBN, selling c. USD634.85 million to authorised banks, helped mitigate a steeper devaluation. Consequently, the FX rate depreciated by 2.0% to NGN1,617.00/USD. Gross FX reserves declined for the fourth consecutive week by USD102.14 million w/w to USD38.04 billion (April 10). In the forwards market, the naira rates decreased across the 1-month (-3.0% to NGN1,670.42/USD), 3-month (-3.6% to NGN1,752.18/USD), 6-month (-5.2% to NGN1,870.78/USD) and 1-year (-7.5% to NGN2,087.66/USD) contracts.
The naira is likely to remain under pressure amid persistent global uncertainty, driven by the US tariff-induced trade tensions that continue to trigger capital outflows. Compounding this are foreign investors’ concerns over declining oil earnings, stemming from the slump in oil prices — a development that could lead to a trade deficit and a shortfall in the current account. Nevertheless, CBN’s sustained interventions are expected to cushion the naira from sharp depreciation in the near term.
