Global Economy
According to the Bureau of Economic Analysis (BEA), the US economy contracted by 0.3% q/q in Q1-25 (Q4-24: +2.4% q/q), marking the first quarterly decline since Q1-22 (-1.0% q/q). The downturn was primarily driven by a sharp surge in imports (+41.3% q/q vs Q4-24: -1.9% q/q), as businesses front-loaded purchases ahead of anticipated tariff hikes, leading to a significant drag on net exports. Meanwhile, exports (+1.8% q/q vs Q4-24: -0.2% q/q) rose modestly, supported by firmer external demand for goods.
Consumer spending (+1.8% q/q; Q4-24: +4.0% q/q) also moderated, while government expenditure (-1.4% q/q; Q4-24: +3.1% q/q) declined, further damping overall output. On a year-on-year basis, real GDP rose by 2.0% y/y in Q1-25 (Q4-24: +2.5% y/y), reflecting continued but slowing economic expansion. Over the short to medium term, we expect US economic growth to be constrained by the combined impact of greater policy uncertainty, persistent trade tensions, and softer demand outlook. Notably, the recent imposition of new tariffs and heightened trade policy uncertainties are expected to dampen business confidence and external demand. As a result, the IMF has revised its 2025 growth projection for the US downward to 1.5% — 120bps cut from the 2.7% initial estimate.
According to flash estimates from Eurostat, the Euro Area’s real GDP expanded by 0.4% q/q in Q1-25 (Q4-24: +0.2% q/q) – above market expectations (+0.2% q/q). The stronger growth reflects signs of monetary policy easing by the European Central Bank, supported by moderating inflation and improving consumer confidence. Across member states, Germany (+0.2% q/q vs Q4-24: -0.2% q/q) and France (+0.1% q/q vs Q4-24: -0.1% q/q) returned to growth, Italy (+0.3% q/q vs Q4-24: +0.2% q/q) expanded while Spain (+0.6% q/q vs Q4-24: +0.7% q/q) moderated slightly.
On an annual basis, GDP rose by 1.2% y/y in Q1-25, unchanged from Q1-24, indicating stable growth despite external pressures. Domestic demand in the Euro Area is likely to remain resilient in the near term, supported by rising real incomes, robust household spending, and potential ECB rate cuts. However, escalating global trade tensions, especially recent US tariffs on European automotive and industrial goods, pose a significant downside to export performance. At the same time, the sharp appreciation of the euro may undermine export competitiveness and pressure corporate margins. Overall, we anticipate a moderation in GDP growth over the coming quarters, driven by weakening external demand and currency-related headwinds. Indeed, the IMF forecasts GDP growth of 0.8% y/y in 2025E (2024FY: 0.9% y/y).
Global Market
Global equities sustained the bullish momentum from last week, buoyed by strong corporate earnings and key economic data releases across major economies, while ongoing trade negotiations remained in focus. Accordingly, US equities (DJIA: +1.6%; S&P 500: +1.4%) were poised to end the week higher, supported by robust earnings from big tech firms, including Meta and Microsoft, which helped offset concerns stemming from the Q1-25 GDP contraction. The market also reacted positively to President Trump’s indication of potential tariff agreements with India, Japan, and South Korea.
Similarly, European equities (STOXX Europe 600: +2.2%; FTSE 100: +1.7%) are set to close the week higher, as investors responded positively to a flurry of corporate earnings across the region. Meanwhile, Asian markets were mixed as Japanese equities (Nikkei 225: +3.2%) advanced on the Bank of Japan’s policy decision and optimism over US-Japan trade talks, while Chinese equities (SSE: -0.5%) declined following (1) investors’ caution over Beijing’s stimulus trajectory, (2) uncertainty around US-China trade tensions, and (3) a sharper-than-expected decline in April manufacturing activity. Elsewhere, the Emerging market (MSCI EM: +1.4%) index advanced, driven by gains in India (+1.8%), whereas the Frontier market (MSCI FM: -0.9%) index closed the week lower, weighed down by declines in Vietnam (-0.2%) and Romania (-0.9%).
Nigeria: Domestic Economy
According to the data from FMDQ, total inflows into the Nigerian Foreign Exchange Market (NFEM) declined by 5.7% m/m to USD3.67 billion in April (March: USD3.90 billion). We attribute the outturn to the decline in inflows from foreign sources (17.9% of total inflows), which fell by 16.5% m/m to USD657.40 million (March: USD787.20 million), marking the lowest level of inflows in seven months. Consequently, inflows from the other corporates (-40.5%) and FPI (-15.7% m/m) segments recorded lower accretion, while inflows from the FDI (+112.7% m/m) segment increased.
At the same time, inflows from local sources (82.1% of total inflows) declined marginally by 2.9% m/m to USD3.02 billion (March: USD3.11 billion) driven by declines in inflows from the exporters/importers (-23.9% m/m) and non-bank corporates (-23.3% m/m) segments, amid a surge in the inflows from the Individuals (+125.4% m/m) and CBN (+43.8% m/m) segments. In the short term, we expect FX inflows to remain relatively strong compared to last year (2024 monthly average: USD2.54 billion), due to improved market structure and increased inflows from the CBN. However, the existing external pressures, including the global trade tensions and increased global uncertainties, are likely to constrain inflows from the foreign segment, ultimately affecting overall FX liquidity.
Based on data from the Domestic and Foreign Portfolio Report of the Nigerian Exchange (NGX), total transactions in the Nigerian equities market surged to an all-time high, rising by 119.0% m/m to NGN1.12 trillion in March (February: NGN509.47 billion). The performance was primarily driven by the higher participation of foreign investors (62.7% of gross transactions). Specifically, foreign investors’ inflows rose to an all-time high, rising by 15.42 ppts m/m to NGN699.89 billion (February: NGN42.65 billion) – largely boosted by block trade transactions, which may have been one-off.
Meanwhile, inflows from domestic investors (37.3% of gross transactions) declined by 11.0% m/m to NGN415.62 billion (February: NGN466.82 billion), due to declines across transactions from institutional (-13.4% m/m) and retail investors (+8.1% m/m). Looking ahead, we expect activities in the stock market to be shaped by Q1-25 earnings results, developments in the macroeconomic environment and movement in the fixed income yields. Additionally, we believe domestic investors will continue to contribute the most to total transaction value, given the likelihood that the recent spike in foreign inflows was transitory.
Capital Markets: Equities
The domestic equities market maintained its positive trajectory this week, as investors assessed a raft of Q1-25 earnings releases. Notably, gains in TRANSCORP (+5.8%) and PRESCO (+9.6%), following the release of their Q1-25 numbers, drove the All-Share Index higher by 0.3% w/w to 106,042.57 points, with the month-to-date and year-to-date returns settling at +0.1% and +3.0%, respectively. Market activity was robust, with trading volume and value increasing by 18.2% and 34.1% w/w, respectively. Meanwhile, sectoral performance was mixed, as the Consumer Goods (+2.9%) and Industrial Goods (+0.4%) indices advanced, while the Oil & Gas (-2.9%), Insurance (-2.9%) and Banking (-0.3%) indices declined.
Looking ahead, we expect investor sentiment to be influenced by macroeconomic signals and movements in fixed income yields.
Money Market and Fixed Income
The overnight (OVN) rate declined by 4bps w/w to 26.8%, as FGN bond coupon inflows (NGN259.96 billion) and banks’ activities at the SDF window (NGN4.94 trillion) offset debits for the FGN bond PMA (NGN397.89 billion). Consequently, the average system liquidity remained robust, settling at a net long position of NGN1.36 trillion (vs a net long position of NGN1.78 trillion in the previous week).
In the absence of liquidity management measures by the CBN, we expect inflows from OMO maturities (NGN239.15 billion) to further boost system liquidity, causing a decline in the OVN rate.
Treasury Bills
The Treasury bills secondary market traded with bullish sentiments driven by the robust system liquidity. Consequently, the average yield declined by 14bps to 23.7%. Across the market segments, the average yield declined by 11bps to 27.0% in the OMO segment, while it advanced by 25bps to 21.1% in the NTB segment. The CBN conducted an OMO auction on Tuesday (April 29), offering instruments worth NGN500.00 billion – NGN250.00 billion for the 329D and NGN250.00 billion for the 350D – to investors. Total subscription settled at NGN1.06 trillion (bid-to-offer: 2.1x), with the CBN eventually allotting NGN804.85 billion – NGN106.25 billion for the 329D and NGN698.60 billion for the 350D.
Looking ahead, we expect the still healthy system liquidity to continue to spur the demand for bills, causing yields to gradually decline. Additionally, the DMO is scheduled to conduct an NTB PMA next Wednesday (May 7) with NGN550.00 billion worth of maturing bills on offer. At the auction, we expect stop rates to taper, albeit marginally.
Bonds
Proceedings in the FGN bond secondary market were bearish as market participants sold off short-dated bonds, further reflecting investors’ cautious bias for duration exposure. As a result, the average yield expanded by 2bps to 19.0%. Across the benchmark curve, the average yield increased at the short (+14bps) end, driven by selloffs of the JAN-2026 (+56bps) bond, while it decreased at the mid (-3bps) and long (-1bp) segments, following demand for the FEB-2031 (-15bps) and JUN-2053 (-11bps) bonds, respectively. At Monday’s PMA, the DMO offered instruments worth NGN350.00 billion to investors through re-openings of the 19.30% FGN APR 2029 (Bid-to-offer: 0.2x; Stop rate: 19.00%) and 18.50% FGN MAY 2033 (Bid-to-offer: 3.0x; Stop rate: 19.99%) bonds. Total subscription level settled at NGN495.95 billion (previous: NGN530.31 billion), with a bid-to-offer ratio of 1.4x (previous: 1.8x). Eventually, the DMO allotted instruments worth NGN397.89 billion (non-competitive: NGN123.00 billion) across the two tenors, resulting in a bid-to-cover ratio of 1.3x.
Over the medium term, we expect a moderation in bond yields, influenced by two factors – (1) the anticipated dovish monetary policy stance and (2) demand and supply dynamics.
Foreign Exchange
The naira appreciated by 0.4% w/w to NGN1,589.00/USD, supported by the CBN’s intervention (c. USD116.20 million). Meanwhile, gross FX reserves increased after six consecutive weekly declines, growing by USD135.96 million w/w to USD37.93 billion (April 30). In the forwards market, the naira rates appreciated across the 1-month (+0.2% to NGN1,646.57/USD), 3-month (+0.6% to NGN1,724.19/USD), 6-month (+0.5% to NGN1,837.00/USD) and 1-year (+0.9% to NGN2,056.24/USD) contracts.
While demand pressures in the FX market seem to have moderated, risks to stability remain heightened due to persistent global uncertainties that could continue to hinder capital inflows in the short term. Consequently, FX liquidity may stay below optimal levels, sustaining pressure on the naira and likely necessitating ongoing CBN interventions to support the currency.
Cordros
