Global Economy
According to the United States Bureau of Labor Statistics, total non-farm payroll employment in the US settled below market expectations (+160,000 jobs) in February, increasing by 151,000 jobs relative to the downwardly revised 125,000 jobs recorded in January.
Analysing the breakdown, significant employment gains were noted across the healthcare (+52,000 jobs), financial activities (+21,000 jobs), transportation & warehousing (+18,000 jobs), and social assistance (+11,000 jobs) sectors, while federal government employment (-10,000 jobs) declined. However, the unemployment rate increased to 4.1% m/m (January: 4.0% m/m) as the number of unemployed individuals rose by 203,000 to 7.05 million, while employment declined by 588,000 to 163.31 million.
Consequently, labour force participation rate eased to 62.4% m/m (January: 62.6% m/m), reflecting the lowest level in 12 months. The weaker-than-expected job data partly underscores the impact of federal workforce reductions by the new US administration and lower business confidence stemming from the implemented trade tariff hikes.
We anticipate this trend to persist in the near term, particularly as new tariffs on imports from Mexico, Canada, and China influence hiring decisions, with businesses adjusting to shifting cost structures and supply chains.
Given these dynamics, we expect the FOMC to adopt a cautious stance, holding the funds rate steady while closely monitoring labour market conditions, especially wage growth—and the potential inflationary pressures stemming from recent trade policies. Indeed, the CME FedWatch Tool assigns a 97.0% probability that the US Fed will maintain the current funds rate at the 23 April Monetary Policy Meeting.
Based on the recently released data from Eurostat, Euro Area’s consumer prices eased by 10bps to 2.4% y/y in February (January: +2.5% y/y). Parsing through the breakdown provided, we note that energy (+0.2% y/y vs January: +1.9% y/y) and core (+2.6% y/y vs January: +2.7% y/y) inflation slowed, while unprocessed food prices (+3.1% y/y vs January: 2.3% y/y) increased in the review period. On a month-on-month basis, consumer prices rose by 0.5% (January: -0.3% m/m).
Although headline inflation in the eurozone is expected to remain above the 2.0% target in the near term, the recent moderation in other key inflation drivers, particularly wages, services, and core inflation, could support a gradual slowdown in price pressures.
Additionally, with the mounting downside risks to growth stemming from weaker exports and continued weakness in investment, the European Central Bank (ECB) may implement another interest rate cut in the April Monetary Policy Meeting. This aligns with market expectations of one or two additional rate cuts this year, potentially bringing the key rate down to 2.0% or 1.75% by 2025.
Global Equities
Global equities continued their decline this week, as investor sentiment remained cautious amid mounting trade war tensions. Accordingly, US equities (DJIA: -2.9%, S&P 500: -3.6%) were poised to end the week lower, as trade uncertainty and shifting tariff policies from the Trump administration fueled investor concerns.
Market sentiment was further influenced by a mixed set of economic indicators, including ISM PMI data, weekly jobless claims, private payrolls, and the February jobs report. At the same time, European equities (STOXX Europe: -0.2%, FTSE 100: -1.4%) mirrored Wall Street losses, further pressured by a weaker-than-expected retail sales data.
Investor sentiment in the region was also influenced by corporate earnings in the UK, with selloffs in Melrose and Rentokil driven by disappointing outlook forecasts. Elsewhere in Asia, Japanese equities (Nikkei 225: -0.7%) closed the week lower weighed down by an unexpected rise in the January unemployment rate and heightened speculation of further monetary tightening after hawkish signals from the Bank of Japan’s Deputy Governor.
In contrast, Chinese equities (SSE: +1.6%) ended the week higher, driven by a rally in technology stocks following Beijing’s parliamentary meeting, which emphasized tech innovation and domestic consumption. Lastly, the Emerging and Frontier Markets (MSCI EM: +3.1%, MSCI FM: +1.2%) closed the week higher, driven by gains in China (+1.6%) and Vietnam (+1.6%), respectively.
Nigeria: Domestic Economy
According to the data obtained from FMDQ, total inflows into the Foreign Exchange Market declined by 12.9% m/m to USD4.12 billion in February (January: USD4.74 billion). This was driven by a broad-based decline across foreign (50.1% of total transaction value) and local (49.9% of total transaction value) inflows.
Parsing through the breakdown, inflows from foreign sources declined by 10.5% m/m to USD2.07 billion (January: USD2.31 billion) reflecting declines in inflows from FPI (-12.5% m/m) and FDI (-12.3% m/m), amid a surge in other corporates inflows (+172.6% m/m). At the same time, inflows from local sources dipped by 15.1% m/m to USD2.06 billion (January: USD2.43 billion) due to declines in inflows from individuals (-62.5% m/m), CBN (-36.3%) and exporters/importers (-22.5% m/m), amid an increase in inflows from non-bank corporates (+3.5% m/m).
We expect FX inflows to remain robust in the short term compared to previous months, driven by improved market confidence. However, the moderation in yields following the rebased inflation print (January 2025: 24.82% y/y) is likely to dampen carry trade opportunities, restraining FX inflows from FPIs, ultimately affecting overall FX liquidity.
Based on the data from the Domestic and Foreign Portfolio Report of the Nigerian Exchange (NGX), total transactions in the local bourse declined by 9.9% m/m to NGN607.05 billion in January (December: NGN673.66 billion). The performance was primarily driven by the lower participation of the domestic investors (88.2% of gross transactions). Specifically, domestic investors’ inflows declined by 11.8% m/m to NGN535.54 billion (December: NGN606.91 billion) due to a decline in transactions from institutional (-33.9% m/m) amid an increase in transactions from retail investors (+33.1% m/m).
On the other hand, inflows from foreign investors (11.8% of gross transactions) rose to the highest level since July 2024 (NGN57.52 billion), rising by 7.1% m/m to NGN71.51 billion in January (December: NGN66.75 billion), partly due to the improved market confidence following a more efficient FX market as well as moderating fixed income yields.
Looking ahead, we expect domestic investors will continue to contribute the most to total transaction value, with the decline in yields in the fixed income market supporting buying activities. Additionally, we expect the relative naira stability to support increased participation from foreign investors in the equities market.
Capital Markets: Equities
Again, the domestic stock market closed the week in negative territory, as selloffs in TRANSCORP (-17.7%), MTNN (-3.2%) and ACCESSCORP (-6.8%) dragged the All-Share Index (ASI) down by 1.2% w/w to 106,533.26 points. Consequently, the year-to-date return moderated to +3.5%. Furthermore, trading activity weakened, as the total volume and value declined by 1.9% w/w and 8.0% w/w, respectively. Also, sectoral performance was broadly negative, as the Banking (-2.9%), Insurance (-2.3%), Consumer Goods (-1.7%), and Oil & Gas (-0.2%) indices all closed lower, while the Industrial Goods index remained flat.
Looking ahead, we expect market volatility to persist as investors contend with delays in bank and insurance earnings filings and dividend announcements while also monitoring yield movement in the fixed income market.
Money Market and Fixed Income
The overnight (OVN) rate expanded by 34bps w/w to 27.7% as OMO auction debits (NGN1.68 trillion) and net NTB issuances (NGN180.44 billion) outweighed inflows from FGN bond coupon payments (NGN279.29 billion). Consequently, the average system liquidity remained in a net short position, settling at NGN101.66 billion (vs NGN388.14 billion in the previous week).
Next week, in the absence of significant inflows to support system liquidity, we expect the OVN rate to remain elevated.
Treasury Bills
The Treasury bills secondary market remained bullish this week as market participants sought to fill unmet bids from the NTB PMA. Accordingly, the average yield declined by 41bps to 20.8%. Across the market segments, average yield declined by 73bps and 9bps to 19.2% and 22.4%, in the NTB and OMO segments, respectively. At Wednesday’s NTB auction, the DMO offered bills worth NGN650.00 billion – NGN70.00 billion for the 91D, NGN80.00 billion for the 182D, and NGN500.00 billion for the 364D bills. Subscription level settled lower at NGN1.92 trillion (previous auction: NGN2.41 trillion), with a bid-to-offer ratio of 3.0x (previous auction: 3.4x).
The auction closed with the DMO allotting NGN830.44 billion – NGN61.52 billion for the 91D, NGN50.95 billion for the 182D, and NGN717.97 billion for the 364D papers – at respective stop rates of 17.00% (unchanged), 17.75% (previous: 18.00%) and 17.82% (previous: 18.43%). Also, the CBN conducted an OMO auction on Thursday, offering instruments worth NGN600.00 billion – NGN300.00 billion for the 355D and NGN300.00 billion for the 362D – to investors. Total subscription settled at NGN1.88 trillion (bid-to-offer: 3.1x), with the CBN allotting NGN1.68 trillion – NGN725.70 billion for the 355D and NGN951.20 billion for the 362D bills at a respective stop rates of 19.19% (previous: 23.95%) and 19.45% (previous: 23.98%).
We expect yields to further decline next week underpinned by (1) the continued downward repricing of yields and (2) Investors looking to fill unmet bids at next week’s market auction. The DMO is scheduled to conduct an NTB PMA next Wednesday (March 12), with NGN550.00 billion worth of maturities on offer.
Bonds
The FGN bond secondary market was bullish this week as investors reinvested coupon inflows into short-dated papers, driving the average yield down by 8bps to 18.5%. Across the benchmark curve, the average yield decreased at the short (-50bps) driven by demand for the MAR-2025 (-248bps) bond, but expanded at the, mid (+9bps) and long (+1bp) segments, due to the selloff of the JUL-2030 (+24bps), and FEB-2031 (+35bps) bonds, respectively.
Over the medium term, we expect a moderation in yields consequent on the (1) anticipated monetary policy administration and (2) imbalance in the demand and supply dynamics.
Foreign Exchange
The naira depreciated by 3.6% to NGN1,556.63/USD at the Nigerian Foreign Exchange Market (NFEM) as the CBN’s intervention — selling c. USD59.00 million to authorized dealers — helped limit further weakening amid persistent excess demand over supply.
Notably, the FX reserves level declined by USD115.18 million w/w to USD38.34 billion (5 March), marking the 8th consecutive week of decline. In the forwards market, the naira rates decreased across the 1-month (-0.7% to NGN1,549.59/USD), 3-month (-0.7% to NGN1,618.82/USD), 6-month (-0.6% to NGN1,721.87/USD) and 1-year (-0.3% to NGN1,905.92/USD) contracts.
Despite the recent rise in market demand pressure, we expect naira volatility to remain contained, supported by strong market liquidity from improved autonomous inflows. Additionally, we anticipate the CBN will continue its interventions during periods of heightened volatility, helping to prevent a sharp depreciation of the naira.
Cordros
