This week, we turn our attention to the Consumer Price Index data for June 2025 which the NBS is scheduled to publish next Tuesday. Based on our estimate, we anticipate disinflation outcome to be sustained with headline inflation rate easing to 22.2% y/y from 22.9%. However, on a monthly basis, we forecast a 14bps uptick in monthly headline inflation to 1.7% underpinned by the usual elevated price uptick (especially on food items) during the Eid-el Kabir celebration.
Our view for the inflation projection is hinged on two major drivers. Firstly, the effect of the CBN’s strategic policy reforms has seen the Naira strengthen in the month of June (up 3.6%) to close at ₦1,529.71. Secondly, the high base year effect from last year’s 34.2% inflation reading is a contributing factor.
Looking ahead, despite the disinflation dynamics and FX stability, we expect the Monetary Policy Committee to keep all policy variables unchanged. Our projection is underpinned by elevated risks in the external environment, persistent shocks in major food baskets (recent incidences of insecurity and flooding is estimated to have devastating impact on food supply) and cautious undertone due to the delay in publishing the rebased GDP numbers for Q1 2025.
During the last MPC meeting in mid-May, the CBN justified the need to keep policy rate elevated noting that reinflationary risks remain potent – implying consistency with its prognosis from the beginning of the year. Also, a potential rate cut could pose risks to FX rate dynamics which has largely been supported by attractive offers on OMO bills.
In other developments, we weigh in on a commentary by the Group CEO of NNPCL regarding Nigeria’s crude oil production output. During the 9th OPEC International Seminar in Vienna held in the week, NNPCL’s Group CEO Bayo Ojulari disclosed that the state-owned oil giant aims to increase crude oil production levels to 2.0mbpd by 2027. This oil production target contrasts with FG’s 2025 budget benchmark of 2.06mbpd at $75.0/bbl which further highlights the overestimation of FG’s revenue projections.
In our half-year macroeconomic report tagged BEYOND SILVER LININGS: Statistical Gains, Social Strains, we noted the shortfalls in oil production and how it could destabilise fiscal position. Specifically, we highlighted that with crude oil production and price dynamics in H1:2025, the actual oil revenue available for FG’s budget may have underperformed the pro-rata amount, ₦10.5tn, by 19.8% in a base case scenario. Interestingly, the NNPC’s timeline of 2027 to reach 2.0mbpd reinforces our case for oil revenue underperformance in H1.
While we commend the FG for some fiscal wins in H1:2025 such as $3.4bn RFI repayment and uptick in trade surplus (up 6.2% y/y to ₦5.2tn), we reiterate the need for firmer fiscal implementation particularly as crude oil production (the major source of FX) remains below 1.5mbpd levels.
Domestic Equities Market: Equities Gain Spotlight as Yields Tumble… ASI up 4.3% w/w
The local bourse experienced a strong performance this week with gains recorded across all trading sessions. The rally intensified toward the end of the week as unmet bids from the NT-bills auction and sharp decline in fixed-income yields redirected investors into the equities market, thereby stirring buy interest across stocks, particularly in financial stocks (Banking and Insurance).
As a result, the NGX ASI advanced 4.3% w/w to 126,151.04 points, market capitalisation rose 4.5% (₦3.5tn) to ₦79.8tn and YTD return nudged higher to 22.6% from 17.6%. However, activity level declined as average volume and value traded fell 1.4% and 0.3% w/w, respectively, to 1.1bn units and ₦21.6bn. The most traded stocks by volume were ACCESSCORP (596.5m units), JAPAULGOLD (528.0m units) and AIICO (273.1m units), while ACCESSCORP (₦13.7bn), GTCO (₦9.9bn) and ZENITH (₦9.5bn) led by value.
Performance across sectors under our coverage was positive as all indices advanced w/w, save for the Oil & Gas index, which lost 0.7% w/w, due to sell-offs on OANDO (-6.1%), and ETERNA (-3.5%). The Insurance and Banking indices led the gainers, up 13.8% and 12.5% w/w, following price uptick in AIICO (+41.9%), MANSARD (+28.4%), ZENITH (+21.2%) and UBA (+19.6%). Trailing, the AFR-ICT and Industrial Goods indices rose 4.9% and 2.9% w/w respectively, as MTNN (+10.2%), OMATEK (+60.4%), WAPCO (+14.6%) and CUTIX (+15.0%) posted weekly gains. Likewise, price appreciation in HONYFLOUR (+16.6%) and NB (+12.3%) pushed the Consumer Goods index higher by 2.2% w/w.
Investor sentiment as measured by market breadth improved to 1.7x (from 1.1x in the prior week) as 86 stocks gained, 15 lost, and 41 closed flat. FTNCOCOA (+60.6%), REDSTARE (+60.6%) and OMATEK (+60.4%) were the top gainers, while LEGENDIN (-12.5%), INTENEGI (-6.8%) and OANDO (-6.1%) led the underperforming stocks. Next week, we anticipate sustained interest in the equities market, as investors continue to seek attractive returns.
Afrinvest
