Global Economy
According to the United States Bureau of Labor Statistics, total non-farm payroll employment in the US rose to a three-month high of 228,000 jobs in March (February: +117,000 jobs), beating market expectations (+135,000). Analyzing the breakdown, significant employment gains were noted across the healthcare sector (+54,000 jobs) induced by higher job offers in health care services, hospitals, as well as nursing & residential care facilities.
Employment in social assistance (+24,000 jobs) also expanded primarily due to higher job demand by individual and family services. Similarly, Retail trade employment (+24,000 jobs) increased, aided in part by the return of workers previously on strike, particularly within food and beverage retail outlets. In contrast, federal government employment (-4,000 jobs) declined, reflecting the effects of workforce reductions under the new US administration.
Consequently, the unemployment rate rose to 4.2% m/m (February: 4.1% m/m), marking the third consecutive month of increase. Meanwhile, labour force participation rate edged higher to 62.5% m/m (February: 62.4% m/m). Despite the headline job gains, we anticipate a softening in labour market conditions in the near to medium term.
We believe the ongoing federal workforce cuts, coupled with subdued business confidence stemming from recent trade tariff increases, are likely to weigh on hiring decisions. Given these dynamics, we expect the Federal Open Market Committee (FOMC) to maintain a cautious approach, likely keeping the funds rate unchanged in the short term, while closely monitoring wage trends and potential inflationary pressures from current trade policies. Indeed, the CME FedWatch Tool places a 57.7% probability on the Fed maintaining its current policy rate at the May 7 meeting.
Based on the recently released data from Eurostat, headline inflation in the Euro Area maintained a downward trend for the second consecutive month, easing by 10bps to 2.2% y/y in March (February: 2.3% y/y). The slowdown was primarily driven by the sharp downturn in energy prices and substantial moderation in services inflation. Specifically, energy prices (-0.7% y/y vs February: +0.7% y/y) declined due to a reduction in electricity tariffs, while services inflation (+3.4% y/y vs February: +3.7% y/y) decelerated to a 33-month low, highlighting the softening consumer demand.
Meanwhile, food inflation (+2.2% y/y vs February: +1.6% y/y) rose to a 4-month high, reflecting increased prices of unprocessed foods. On a month-on-month basis, consumer prices rose by 0.6% (February: +0.4% m/m). Looking ahead, we expect headline inflation to moderate further in the near term, driven by sustained weakness in energy prices and easing wage growth. Given these dynamics, we anticipate that the European Central Bank (ECB) will proceed with a rate cut at its next monetary policy meeting, particularly amid growing downside risks to growth from subdued export activity and weak investment momentum. This synchronizes neatly with market expectations, which currently price in an 80.0% probability of a 25bps rate cut at the April 17 meeting.
Global Market
Global stock markets extended losses this week, as US President Trump’s sweeping tariffs on most imports into the United States reignited fears of a full-blown trade war and a global economic slowdown. At the time of writing, US equities (DJIA: -2.5%; S&P 500: -3.3%) were poised for a weekly decline, reflecting selloffs in blue-chip names, such as Apple, Amazon, and Nike as higher levies on key production hubs, most notably China and Vietnam, stoked concerns around input cost pressures and potential earnings erosion.
Similarly, European equities (STOXX Europe: -4.5%, FTSE 100: -2.8%) were on track for their steepest weekly decline in three years, as risk aversion intensified following Washington’s reciprocal tariff measures on the region. Specifically, a 10.0% tariff was imposed on imports from the UK, while a 20.0% duty was levied on goods from the Eurozone, prompting immediate warnings of retaliatory action from the European Union. Elsewhere, Asian equities mirrored global sentiment, with Japanese stocks (Nikkei 225: -9.0%) posting their sharpest weekly drop in five years and slipping to a seven-month low, following the US’s announcement of a 24.0% tariff on imports from Japan, in addition to the previously implemented 25.0% duty on all vehicle imports from the country.
Meanwhile, Chinese equities (SSE: -0.3%) also ended the week lower, following the US imposition of an additional 34.0% duty on Chinese imports, which raised the cumulative tariff burden on Chinese goods to 54.0%. Finally, the Emerging and Frontier Markets (MSCI EM: -1.6%, MSCI FM: -2.1%) indices declined, reflecting losses in India (-2.5%) and Vietnam (-9.3%), respectively.
Nigeria: Domestic Economy
According to the Central Bank of Nigeria (CBN), international payments facilitated by the apex bank increased by 17.2% y/y to USD497.91 million in February (February 2024: USD424.96 million). The improvement was driven by higher direct remittance payments (25.2% of the total international transactions), amid lower debt service (55.6% of the total international transactions) and letters of credit (19.2% of the total international transactions) payments. Precisely, direct remittance payments rose by 220.8% y/y to USD125.58 million (February 2024: USD39.15 million) influenced by higher diaspora remittances.
On the other hand, debt service payments declined by 2.3% y/y to USD276.73 million (February 2024: USD283.22 million), while payments for letters of credit dropped by 6.8% y/y to USD95.59 million (February 2024: USD102.60 million), partly reflecting lower imports amid weaker consumer demand. On a month-on-month basis, international payments facilitated by CBN declined by 24.5% relative to the USD630.64 million recorded in January. Looking ahead, we expect international payments to remain elevated, primarily due to FG’s debt repayment and servicing obligations. Additionally, we expect the improvement in foreign exchange liquidity to strengthen consumer demand, leading to a gradual increase in imports of goods and services, which will support the growth in payments of letters of credit and direct remittances.
According to the data from FMDQ, total inflows into the Nigerian Foreign Exchange Market (NFEM) declined by 5.5% m/m to USD3.90 billion in March (February: USD4.13 billion). We attribute the decline to the substantial decrease in inflows from foreign sources (20.2% of total inflows), which dipped by 61.9% m/m to USD787.20 million (February: USD2.07 billion) – the lowest level in six months – due to erosion of market confidence following global trade uncertainties. As a result, the FPI (-67.7% m/m) segment recorded lower accretion, while inflows from other corporates (+89.8% m/m) and FDI (+54.2% m/m) segments increased.
Meanwhile, inflows from local sources (79.8% of total inflows) rose to a twenty-two month high, rising by 51.0% m/m to USD3.11 billion (February: USD2.06 billion) driven by increase in inflows from the CBN (+204.3% m/m), non-bank corporates (+26.7% m/m), and exporters/importers (+21.5% m/m) segments, amid a decline in the inflows from the Individuals (-43.7% m/m) segment. In the short term, we expect that foreign exchange (FX) inflows will remain robust, driven by improved market confidence. However, the moderation in yields and global trade uncertainties are likely to dampen carry trade opportunities, restraining FX inflows from FPIs, ultimately affecting overall FX liquidity.
Capital Markets: Equities
Bearish sentiment prevailed in the domestic equities market this week, as sell pressures on OANDO (-13.1%) and FIRSTHOLDCO (-7.6%) dragged the All-Share Index lower by 0.1% w/w to 105,511.89 points. Consequently, the year-to-date return moderated to +2.5%, reflecting a slight pullback in market momentum. Elsewhere, trading activity was subdued, primarily due to the holiday-shortened trading sessions, with volume and value declining by 84.4% w/w and 92.8% w/w, respectively. On sectors, performance was broadly negative, as the Insurance (-4.1%), Oil & Gas (-1.2%), Consumer Goods (-0.9%), and Industrial Goods (-0.2%) indices closed lower, while the Banking (+0.2%) index advanced.
Next week, trading is likely to remain cautious in the absence of major positive catalysts. Nonetheless, recent dividend declarations and anticipated earnings from banking names, including ACCESSCORP and FIRSTHOLDCO, may spur bargain purchases.
Money Market and Fixed Income
The overnight (OVN) rate contracted by 10bps w/w to 26.9% as inflows from OMO maturities (NGN651.86 billion) offset CRR debits (c. NGN400.00 billion), thereby boosting system liquidity. Consequently, the average system liquidity improved, settling at a net long position of NGN1.33 trillion (vs a net long position of NGN29.28 billion in the previous week).
Next week, barring any liquidity mop-up activity by the CBN, we expect liquidity to remain robust, causing the OVN rate to trend lower.
Treasury Bills
The Treasury bills secondary market was bearish as the average yield expanded by 35bps to 21.8%. This is attributed to selloffs by offshore players in long-dated bills, which offset the increased demand driven by improved system liquidity. Across the market segments, the average yield advanced by 43bps and 16bps to 19.9% and 24.4% in the NTB and OMO segments, respectively.
Given our projections of a strong liquidity position next week, we expect increased demand for bills, which should lead to a decline in yields. Additionally, the DMO is scheduled to conduct an NTB PMA next week with c. NGN216.51 billion worth of maturing bills on offer; we expect rates to taper at the auction, albeit slightly.
Bonds
Proceedings in the FGN bond secondary market were quiet, albeit with a bullish undertone as the average yield declined by 1bp to 18.7%. We attribute this to the shortened trading week and investors’ anticipation of the Q2-25 auction calendar. Overall, investors have portrayed more inclination toward short-dated bills/bonds. Across the benchmark curve, the average yield decreased at the short (-4bps) and mid (-1bp) segments following demand for the JAN-2026 (-21bps) and FEB-2031 (-7bps) bonds, respectively, while it closed flat at the long end.
Next week, we expect cautious sentiments to persist as market participants monitor the release of the Q2-25 auction calendar. Over the medium term, we expect a moderation in bond yields, influenced by two factors – (1) the anticipated dovish monetary policy stance and (2) shifts in demand and supply dynamics.
Foreign Exchange
The official FX rate appreciated by 0.2% to NGN1,536.00/USD as FX sales by offshore players driven by an expected OMO auction offset the lack of intervention from the CBN and negative sentiments stemming from (1) the imposition of a 14.0% tariff by Trump on Nigerian exports to the US (2) increased oil supply by OPEC+, causing oil prices to temper. Meanwhile, gross FX reserves declined for the third consecutive week by USD135.57 million w/w to USD38.17 billion (April 2). In the forwards market, the naira rates decreased across the 1-month (-2.8% to NGN1,619.49/USD), 3-month (-3.4% to NGN1,689.27/USD), 6-month (-2.9% to NGN1,772.91/USD) and 1-year (-2.1% to NGN1,930.55/USD) contracts.
While we acknowledge the moderate naira appreciation, near-term risks to naira volatility persist. Concerns about oil receipts, underpinned by lower oil prices, are likely to temper net FX inflows from Foreign Portfolio Investors (FPIs), which is likely to increase pressure on the naira. Nonetheless, CBN’s sustained market intervention and reduced market distortions are expected to prevent a sharp depreciation of the naira.
