Global Economy
At the April monetary policy meeting, the People’s Bank of China (PBoC) maintained its key lending rates as anticipated. Specifically, the one-year Loan Prime Rate (LPR) and the five-year mortgage rate were held steady at 3.1% and 3.6%, respectively.
The decision reflects the PBoC’s cautious stance amid mixed economic signals, including the uneven GDP growth and existing deflationary pressures against the backdrop of a weakening yuan. Although Q1-25 GDP expanded by a stronger-than-expected 5.4% y/y, the recovery remains uneven, with lingering concerns around weak consumer demand, deflationary pressures, and a fragile property sector.
Additionally, the recent depreciation of the yuan has added to policy constraints, as further easing could exacerbate capital outflow risks and intensify downward pressure on the currency. As such, the central bank opted to maintain its current policy settings, adopting a wait-and-see approach as it gauges the effects of earlier easing measures and monitors the evolving fallout from renewed US-China trade tensions.
Looking ahead, we anticipate that the PBoC will prioritize currency stability in the near term, which could limit the scope for a rate cut at the next policy meeting. Nonetheless, the escalating trade tensions still present downside risks to business confidence and external demand. Given these growing uncertainties, we do not rule out the possibility of a rate cut in H2-25 as a means to boost domestic consumption and revive investment activity.
Meanwhile, flash estimates from S&P Global revealed a slowdown in business activities in the US, as Composite PMI eased to 51.2 points in April (March: 53.5 points), reflecting the weakest reading in 16 months. The slowdown was primarily driven by a sharp deceleration in services activity, which offset the modest improvement in manufacturing output.
For context, the Services PMI moderated to 51.4 points (March: 54.4 points), reflecting slower growth in new businesses amid heightened customer uncertainty, stemming from tariff-related disruptions and a fragile economic backdrop, particularly in foreign markets. Ultimately, the softer demand environment prompted service providers to scale back hiring efforts.
On the other hand, the Manufacturing PMI edged up to 50.7 points in April (March: 50.2 points), indicating a marginal uptick in production and new orders, and suggesting a tentative recovery of domestic demand. However, export sales contracted sharply, as tariffs, while supportive of local output, continued to weigh on external demand.
That said, our near-term outlook for the US private sector is characterized by slower growth, inflationary pressures, manufacturing sector weakness and steadied expansion of services sector. Consequently, we expect a cautious near-term economic environment, with potential risks of stagflation – stagnant growth coupled with rising inflation. Businesses may continue to face challenges in balancing growth with cost pressures.
Global Market
Global equities rebounded this week as renewed optimism over US-China trade talks revived investor appetite for riskier assets. As of the time of writing, US stocks (DJIA: +2.4% and S&P 500: +3.8%) were poised to end the week on a strong note driven by easing trade tensions and dovish signals from Federal Reserve officials for possible rate cuts by summer. Investor sentiment was further buoyed by strong earnings from Google’s parent company, Alphabet.
Similarly, European equities (STOXX Europe: +2.6% and FTSE 100: +1.7%) were on track for a weekly gain as trade war concerns abated. Similarly, Asian equities (Nikkei 225: +2.8%; SSE: +0.6%) advanced, particularly buoyed by positive developments in US-Japan trade talks and growing expectations that the US Federal Reserve may cut interest rates sooner than expected. Investor sentiment was further lifted by Beijing’s commitment to implement proactive fiscal measures and ease monetary policy.
Emerging market equities (MSCI EM: +2.3%) gained following positive sentiments in China (+0.6%) and India (+0.9%). Likewise, the Frontier market equities (MSCI FM: +0.8%) closed the week on a positive note, reflecting gains in Vietnam (+0.8%).
Nigeria: Domestic Economy
According to data from the Central Bank of Nigeria (CBN), Credit to the Private Sector (CPS) increased by 6.8% y/y to NGN76.27 trillion in March (March 2024: NGN71.43 trillion). We note that the pace of growth has slowed significantly compared to the previous year due to the waning impact of currency depreciation on banks’ foreign-denominated assets, following the recent stability of the naira.
On the other hand, credit to the government rose by 28.9% y/y to NGN25.86 trillion (March 2024: NGN20.05 trillion), indicating increased government borrowings from domestic banks for deficit financing. Overall, broad money supply (M3) grew by 23.9% y/y to NGN114.22 trillion, following increases across quasi (+26.6% y/y) and narrow (+19.7% y/y) money supply.
On a month-on-month basis, the CPS increased marginally by 2bps to NGN76.27 trillion in March (February: -1.4% m/m to NGN76.26 trillion), due to the prevailing tight financial conditions in the local economy. Looking ahead, we expect CPS growth to remain subdued in the near term, constrained by the prevailing tight monetary policy environment. However, a potential shift toward monetary easing in H2-25 could provide some support for CPS growth over the medium term.
According to the CBN’s monthly economic report, the FGN’s retained revenue declined by 69.2% m/m to NGN483.47 billion in January (December 2024: NGN1.57 trillion). This was primarily driven by a steep drop in the FGN’s Independent revenue (-96.7% m/m) partly due to inefficiencies in Government-Owned Enterprises (GOEs), Ministries, Department and Agencies. Additionally, the FGN’s share of exchange gain (-40.5% m/m) decreased following a relatively stable naira during the month.
Meanwhile, the FGN’s allocation from the Federation Account also moderated (-4.6% m/m), driven by lower oil (-45.5% m/m) and non-oil tax (-22.2% m/m) receipts during the period. At the same time, aggregate expenditure dropped by 15.5% m/m to NGN1.62 trillion (December 2024: NGN1.91 trillion) owing to the delay in capital releases and lower recurrent spending (-13.9% y/y).
On this backdrop, the overall fiscal deficit rose by 228.8% m/m to NGN1.13 trillion (pro-rated budget: NGN764.91 billion | December 2024: NGN344.79 billion), reflecting the sharp decline in retained revenue. That said, we anticipate FGN 2025e revenue to remain below budgeted levels, as we expect oil revenue to fall short of the budget (NGN21.00 trillion), reflecting lower-than-budgeted oil production and falling oil prices.
Based on our projected budget implementation rate of 86.5% (NGN47.56 trillion vs Budget: NGN54.97 trillion), we anticipate that the fiscal deficit will exceed the official estimate. We project the fiscal deficit will print NGN14.68 trillion (including GOEs and project-tied loans) in 2025E (Budget: NGN13.08 trillion).
Capital Markets: Equities
The Nigerian equities market returned to positive territory this week, recording gains in three out of four trading sessions, as investors reacted positively to corporate earnings releases during the week. Specifically, bargain hunting in MTNN (+5.6%), WAPCO (+13.3%), GTCO (+6.9%), NESTLE (+10.0%), and ZENITHBANK (+5.7%), lifting the All-Share Index (ASI) by 1.5% w/w to close at 105,753.05 points. As a result, the MTD loss moderated to -1.9% while the YTD gain increased to 2.7%.
Market activity strengthened, with trading volume and value increasing by 21.7% and 30.3%, respectively. Sectoral performance was mixed: the Consumer Goods index led with a remarkable 14.8% gain, followed by the Banking index (+4.2%). However, the Oil and Gas (+10.7%), Insurance (-6.7%), and Industrial Goods (-6.1%) indices posted losses.
Given the ongoing Q1-25 earnings season, we anticipate that decent earnings releases across the board will underpin positive sentiment in the equities market. In the medium term, however, investor sentiment is likely to be shaped by broader macroeconomic developments and the direction of yields in the fixed income market.
Money Market and Fixed Income
The overnight (OVN) rate declined by 518bps w/w to 26.9%, as inflows from FGN bond coupon disbursements (NGN6.72 billion), contractor payments and FX sales to the CBN outweighed debits from net NTB issuances (NGN314.38 billion). Consequently, the average system liquidity improved, settling at a net long position of NGN1.18 trillion (vs a net long position of NGN315.77 billion in the previous week).
Next week, we expect that the inflows from FGN bond coupon (NGN5.63 billion) will be insufficient to boost system liquidity, following debits (NGN1.01 trillion) for the OMO auction conducted today (April 25). Hence, we anticipate the lower liquidity levels to prompt a slight uptick in the OVN rate.
Treasury Bills
The Treasury bills secondary market traded with bullish sentiments underpinned by the (1) strong system liquidity through most of the week and (2) investors looking to fill unmet bids at Wednesday’s PMA. Consequently, the average yield declined by 48bps to 23.8%.
Across the market segments, the average yield declined by 7bps and 109bps to 20.8% and 27.1% in the NTB and OMO segments, respectively. At Wednesday’s NTB auction, the CBN offered bills worth NGN400.00 billion – NGN50.00 billion for the 91D, NGN100.00 billion for the 182D, and NGN250.00 billion for the 364D bills.
Total subscription levels settled higher at NGN1.54 trillion (previous auction: NGN1.13 trillion), indicating a bid-to-offer ratio of 3.9x (previous auction: 1.4x). The auction closed with the CBN over-allotting to the tune of NGN714.38 billion – NGN51.37 billion for the 91D, NGN12.72 billion for the 182D, and NGN650.28 billion for the 364D papers – at respective stop rates of 18.00% (previous: 18.50%), 18.50% (previous: 19.50%) and 19.60% (previous: 19.63%).
Also, the CBN conducted an OMO auction today (April 25), offering instruments worth NGN500.00 billion – NGN250.00 billion for the 298D and NGN250.00 billion for the 319D – to investors. Total subscription settled at NGN1.39 trillion (bid-to-offer: 2.8x), with the CBN allotting NGN1.01 trillion – NGN319.54 billion for the 298D and NGN688.30 billion for the 319D.
Looking ahead, given our expectations of a subdued system liquidity, we anticipate the demand for bills to wane, causing yields to rise, albeit slightly.
Bonds
Proceedings in the FGN bond secondary market were quiet as market participants largely remained on the sidelines, adopting a cautious approach ahead of the bond auction scheduled for Monday. As a result, the average yield expanded by 1bp to 19.0%.
Across the benchmark curve, the average yield increased at the short (+2bps) end driven by selloffs of the JAN-2026 (+13bps) bond, while it declined at the mid (-3bps) segment following demand for the FEB-2031 (-14bps) bond. The average yield closed flat at the long end
Next week, we believe the outcome of this month’s FGN bond auction on Monday (28 April) will shape the direction of yields in the secondary market. At the auction, the DMO is set to offer instruments worth NGN350.00 billion through re-openings of the APR-2029 and MAY-2033 bonds. 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 appreciated by 0.3% w/w to NGN1595.00/USD, supported by the CBN’s intervention – selling c. 140.00 million dollars to authorised banks amid the ease in demand pressure. Meanwhile, gross FX reserves declined for the sixth consecutive week by USD66.00 million w/w to USD37.81 billion (April 24).
In the forwards market, the naira rates depreciated across the 1-month (-0.5% to NGN1,650.54/USD), 3-month (-0.6% to NGN1,730.03/USD), 6-month (-2.4% to NGN1,846.90/USD) and 1-year (-4.6% to NGN2,074.22/USD) contracts.
Although demand pressures in the FX market appear to have eased, we note that upside risks persist amid ongoing global uncertainties, which are likely to continue dampening capital inflows in the near term. As a result, FX liquidity is expected to remain suboptimal, potentially sustaining pressure on the naira and prompting continued interventions by the CBN to stabilize the currency.
Cordros
