Global Economy
According to the Office for National Statistics (ONS), headline inflation in the UK moderated for the second consecutive month, settling at 2.6% y/y in March (February: +2.8% y/y) – below market expectations (+2.7% y/y). The disinflationary trend was primarily driven by a further decline in energy costs and a slowdown in food prices.
Notably, energy inflation (-8.0% y/y vs February: -6.8% y/y) fell to a four-month low, reflecting a significant drop in petrol and diesel prices. Concurrently, food inflation (+3.0% y/y vs February: +3.3% y/y) eased due to lower prices in items like confectionery and dairy. Meanwhile, core inflation edged down to 3.4% y/y (February: +3.5% y/y), as the slower growth in transport costs (+1.2% y/y vs February: +1.8% y/y) outweighed the pressure from clothing and footwear prices (+1.1% y/y vs February: -0.6% y/y).
On a month-on-month basis, consumer prices eased to 0.3% in March (February: +0.4% m/m). Looking ahead, inflationary pressures are expected to rise in the near term, driven by the increases in energy prices due to the higher energy price cap (+6.4%q/q to GBP1,849.00), along with the increase in council tax in April. Nevertheless, the recent inflation data has strengthened expectations for monetary policy easing, with financial markets now pricing in a c. 86.0% probability of the Bank of England reducing the bank rate by 25bps at their next policy meeting on May 8.
According to the National Bureau of Statistics (NBS) of China, the second-largest economy grew by 5.4% y/y in Q1-25 (Q4-24: +5.4% y/y | Q1-24: +4.5% y/y), in line with market expectations. The steady growth reflects the continued impact of policy support aimed at stabilising domestic demand and restoring investor confidence, despite persistent structural challenges. We note that infrastructure spending and fiscal stimulus have supported modest improvements in manufacturing and services activity. However, overall momentum remains constrained by the prolonged downturn in the property sector and subdued consumer sentiment.
On a quarter-on-quarter basis, the economy grew by 1.2% (Q4-24: +1.6% q/q). We expect the Chinese economy to face further pressure in the near term, following the renewed escalation in trade tensions between China and the US, marked by the imposition of c. 145.0% tariffs by the US and retaliatory duties (125.0%) by China.
These actions are likely to weigh on export growth and investor confidence. In addition, persistent weakness in the real estate sector and muted expansion in household spending may continue to slow economic activity. Accordingly, the Chinese government is unlikely to meet its annual growth target of 5.0% in 2025E. Indeed, the IMF projects China’s growth to decelerate to 4.6% in 2025E compared with 4.8% y/y in 2024E.
Global Market
Global equities traded with mixed sentiments this week as global trade-related developments continued to drive investor sentiments. Accordingly, US stocks (DJIA: -1.4% and S&P 500: -1.6%) are set to close the week lower amid renewed concerns over trade tensions following the Trump administration’s midweek decision to tighten restrictions on chip exports to China. On the other hand, European equities (STOXX Europe: +3.9% and FTSE 100: +3.3%) reversed last week’s losses as investors grew cautiously optimistic about potential relief from US tariffs.
Also supporting investors’ sentiment in the region was the positive UK inflation rate (+2.6% y/y) for March, which came below market expectation (+2.7% y/y). In Asia, Japanese equities (Nikkei 225: +2.4%) climbed on encouraging signs from US-Japan trade talks, while Chinese equities (SSE: +1.3%) posted gains, driven by a blend of positive economic data as well as hopes of fresh policy support from Beijing to offset tariff impacts.
On a broader note, the Emerging market equities (MSCI EM: +1.3%) closed higher supported by improved investor sentiment in China (+1.3%). Similarly, the Frontier market equities (MSCI FM: +1.6%) ended the week on a strong note, buoyed by notable gains in Morocco (+6.6%) and modest improvements in Romania (+0.4%).
Nigeria: Domestic Economy
According to the National Bureau of Statistics (NBS), headline inflation increased by 105bps to 24.23% y/y in March (February: 23.18% y/y). Analysing the breakdown, food prices (-122bps to 21.79% y/y) slowed while core inflation (+142bps to 24.43% y/y) increased for the second month in a row. We attribute the renewed price pressures to the combined impact of (1) festive-induced spending, (2) higher energy costs, and (3) the depreciation of the naira within the period. On a month-on-month basis, the headline inflation surged by 185bps to 3.90% m/m (February: 2.04% m/m).
For April, consumer prices are expected to increase further. Subsisting currency pressures is expected to escalate import costs for both food and non-food items. In addition, the dwindling supply of agricultural produce following the end of the main harvest season and the ongoing planting season is likely to exert further upward pressure on food prices. Furthermore, though the pace of increase in energy prices has moderated compared to the previous year, it remains elevated and is expected to continue contributing to overall inflationary pressures. We expect the aforementioned factors to drive an increase in headline inflation in April.
According to the Nigerian Upstream Petroleum Regulatory Commission (NUPRC), Nigeria’s crude oil production (including condensates) declined for the second consecutive month, decreasing by 4.1% m/m to 1.60 mb/d in March (February: 1.67 mb/d), its lowest level since October 2024. We attribute the decline partly to increased pipeline vandalism and sub-optimal investments in the sector.
Notably, the increases witnessed across the Brass (+27.6%m/m), Bonny (+20.2%m/m), Escravos (+13.7% m/m), Odudu (+12.1% m/m), Tulja-Okwuibome (+11.1% m/m) and Agbami (+8.0% m/m) terminals were not enough to offset the declines in Qua Iboe (-16.9% m/m) and Forcados (-12.6% m/m) terminals.
Looking ahead, gradual investments and improved tracking measures in the oil sector are expected to support crude oil production above 2024 levels on average. Nonetheless, we cite that pipeline security concerns continue to present as downside risk to near-term output. We maintain our average crude oil production forecast (including condensates) at 1.68 mb/d for 2025E (2024FY: 1.56 mb/d).
Capital Markets: Equities
The local bourse extended its bearish run for another week as investors reacted negatively to the latest inflation data amid lingering concerns over the potential adverse effects of President Trump’s new tariffs. Consequently, the All-Share Index declined by 0.3% w/w to close at 104,233.81 points. The market downturn was largely driven by profit-taking activities in ZENITHBANK (-4.2%), GTCO (-3.1%), NESTLE (-2.0%) and FIRSTHOLDCO (-1.6%).
As a result, the MTD and YTD returns printed -3.3% and +1.3%, respectively. Trading activity was relatively weaker, following a 26.7% decrease in the total trading volume and a 18.4% drop in trading value. Across sectors, the Banking (-5.4%) and Insurance (-2.3%) indices declined while the Consumer Goods (+2.4%) and Oil and Gas (+0.2%) indices advanced. The Industrial Goods index closed flat.
In the week ahead, we expect broader market sentiment to remain cautious due to uncertainty in the global economy, particularly surrounding trade tensions and their potential impact on risk appetite. However, we note that the commencement of Q1-25 earnings season may spark selective buying interest.
Money Market and Fixed Income
The overnight (OVN) rate expanded by 509bps w/w to 32.1%, as CBN’s debits for FX sales (c. NGN250.00 billion) outweighed inflows from FGN bond coupon disbursements (NGN28.49 billion). Consequently, the average system liquidity weakened, settling at a net long position of NGN315.77 billion (vs a net long position of NGN425.33 billion in the previous week).
Next week, barring any liquidity tightening measures by the CBN, we expect inflows from FGN bond coupon disbursements (NGN145.98 billion) to boost system liquidity, likely driving a moderation in the OVN rate.
Treasury Bills
The Treasury bills secondary market traded with mixed sentiments, as higher inflation numbers in March seemed to dampen hopes for a dovish monetary policy in the near term. Nonetheless, market activities reflected renewed buy-interest from offshore investors, with onshore investors tilting toward a more cautious approach. Consequently, the average yield declined by 57bps to 24.3%. Across the market segments, the average yield declined by 15bps and 107bps to 20.9% and 28.2% in the NTB and OMO segments, respectively.
Given our expectations for improved system liquidity next week, we anticipate an improvement in the demand for bills, causing yields to taper slightly. Additionally, the CBN is scheduled to conduct an NTB PMA next Wednesday (23 April) with NGN400.00 billion worth of maturing bills on offer. At the auction, we expect rates to taper, albeit slightly.
Bonds
Proceedings in the FGN bond secondary market were bearish as the average yield expanded by 13bps to 19.0%. We attribute this to selloffs from offshore players, particularly on the JAN-2026 bond. Across the benchmark curve, the average yield increased at the short (+26bps) end, driven by selloffs of the JAN-2026 (+132bps) bond, while it decreased at the mid (-3bps) and long (-2bps) segments following demand for the FEB-2031 (-12bps) and JUN-2053 (-16bps) bonds, respectively.
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. Nonetheless, persistent inflationary pressure remains a downside to our expectations for a dovish tilt in monetary policy stance in the near term.
Foreign Exchange
The naira appreciated by 1.1% w/w to NGN1600.00/USD, supported by the CBN’s strong intervention – selling c. 280.00 million dollars to authorised banks. Meanwhile, gross FX reserves declined for the fifth consecutive week by USD111.21 million w/w to USD37.89 billion (April 16). In the forwards market, the naira rates appreciated across the 1-month (+1.5% to NGN1,642.03/USD), 3-month (+0.8% to NGN1,720.49/USD), 6-month (+1.6% to NGN1,802.37/USD) and 1-year (+1.6% to NGN1,979.27/USD) contracts.
The naira is likely to remain under pressure, weighed down by weak capital inflows amid persistent global uncertainties from the trade war and concerns over a potentially deteriorating trade balance due to lower oil prices. Nonetheless, sustained CBN interventions are expected to help contain the risk of sharp depreciation in the near term.
Cordros
