Global Economy
According to the United States Department of Labour, initial jobless claims in the US rose by 7,000 to 226,000 in the week ending 2 August, up from 219,000 the previous week and above market expectations of 221,000.
While the labour market remains broadly stable, the increase reflects slower job creation and limited re-employment opportunities, driven by slowing economic activity and heightened business uncertainty. On a non-seasonally adjusted basis, notable increases were observed in Massachusetts (+1,155), Texas (+900), and Oregon (+881), while the most significant decline was recorded in New York (-904), California (-590) and Georgia (-590).
Meanwhile, the 4-week moving average initial claims data shows a moderate decline of 500 to 220,750 (vs. week ending 26th July: 221,250). Looking ahead, we expect weak job creation, driven primarily by uncertainty over US trade policies and rising cost pressures from tariffs, to keep hiring subdued in the near term. Consequently, jobless claims are likely to remain elevated, underscoring the drag from softer business confidence and reduced labour demand.
The Bank of England (BoE) voted by a narrow majority of 5-4 to cut its key interest rate by 25 basis points to 4.00% (previously 4.25%) at the conclusion of its August monetary policy meeting. The Committee noted that underlying domestic inflationary pressures, particularly in prices and wages, have continued to ease, albeit unevenly. Meanwhile, GDP growth has been sluggish, mirroring a gradual softening in labour market conditions.
Although geopolitical risks continue to weigh on economic activity, uncertainty around trade policy has eased somewhat. In its forward guidance, the Committee stressed that the timing and pace of further rate cuts will hinge on how quickly underlying disinflationary pressures continue to subside.
Looking ahead, while the Committee remains concerned about subdued economic activity and a weakening labour market, we expect it to adopt a measured and cautious approach, given the persistently slow pace of disinflation and the need for continuous reassessment of the inflation outlook. Overall, we anticipate the Bank of England will leave rates unchanged at its September policy meeting.
Global Markets
Global equities rallied this week, buoyed by renewed expectations of a Fed rate cut in September, a dovish shift by the BoE, and strong corporate earnings from major markets, with investors shrugging off fresh US tariffs announcements. Accordingly, US equities (DJIA: +0.9%, S&P 500: +1.6%) were on track to end the week higher, bolstered by renewed bets on a Fed rate cut, upbeat earnings from Palantir, Pfizer, and McDonald’s, and a rally in Apple following its USD100.00 billion pledge for US manufacturing investment.
At the same time, European equities (STOXX Europe: +2.1%, FTSE 100: +0.4%) were poised for a positive close, on the back of strong corporate results, the BoE’s dovish tone, and a sharp rebound in UK banking stocks, supported by a favourable Supreme Court ruling. Meanwhile, Asian equities (Nikkei 225: +2.5%, SSE: +2.1%) tracked Wall Street’s gains, with further support from solid earnings reports, stronger-than-expected Chinese trade data, and optimism surrounding US-China trade negotiations, as President Trump signalled a near-term extension of the current truce set to expire on August 12. Finally, Emerging and Frontier Markets (MSCI EM: +2.8%, MSCI FM: +3.5%) indices posted gains, reflecting strong performances in China (+2.1%) and Vietnam (+6.4%), respectively.
Nigeria: Domestic Economy
According to data from the National Bureau of Statistics (NBS), capital importation into Nigeria increased by 67.1% y/y in Q1-25 to USD5.64 billion (Q1-24: USD3.38 billion) – the highest inflow since Q1-20 (USD5.85 billion). While the sharp growth partly reflects a low base effect from the prior year, it also signals growing investor optimism, supported by improving macroeconomic conditions, gradual FX market stabilization, and renewed confidence in policy direction.
Foreign capital inflows rose across major segments, with portfolio investments rising sharply by 150.8% y/y to USD5.20 billion (Q1-24: USD2.08 billion), while foreign direct investments also grew modestly, by 6.0% y/y to USD126.29 million. (Q1-24: 119.18 million). However, inflows from other investments declined by 73.7% y/y to USD311.17 million (Q1-24: USD1.18 billion). On a quarter-on-quarter basis, total capital importation rose by 10.9% (Q4-24: USD5.09 billion), reinforcing the improving investor sentiment.
We expect capital importation to improve further in the short to medium term, underpinned by ongoing foreign exchange reforms, rising investor confidence, competitive naira yields, and gradually strengthening macroeconomic fundamentals.
According to recently released data from the National Bureau of Statistics (NBS), Value-Added Tax (VAT) collections rose 62.2% y/y to NGN1.95 trillion in Q4-24 (Q4-23: NGN1.20 trillion). The surge reflects the combined effects of (1) resilient domestic consumption, (2) higher consumer prices relative to 2023 levels, and (3) the impact of naira depreciation on foreign VAT collections. On a q/q basis, total VAT receipts increased by 9.2%to NGN1.95 trillion (Q3-24: NGN1.78 trillion), supported by stronger inflows from foreign VAT (+23.6% q/q to NGN554.68 billion) and Nigerian Customs Service import VAT (+15.6% q/q to NGN474.75 billion), while local VAT eased marginally (-0.59% q/q to NGN917.40 billion).
For 2024FY, total VAT collections stood at NGN6.72 trillion, up 84.7% y/y from NGN3.64 trillion in 2023. While elevated prices and the gradual recovery in consumer demand are expected to continue supporting VAT collections in the near term, we anticipate that the boost from naira depreciation on foreign and import-related VAT will fade as the naira remains stable. Consequently, overall growth in VAT collections is likely to moderate.
Capital Markets: Equities
The domestic equities market extended its bullish momentum for the eleventh consecutive week, underpinned by sustained bargain hunting and a strong positive reaction to the enactment of the Insurance Industry Reform Act. Notably, gains in BUAFOODS (+18.9%), DANGCEM (+9.2%), BUACEMENT (+13.9%), AIICO (+59.8%), CORNERST (+54.5%) and NEM (+29.9%) lifted the NGX All-Share Index by 3.2% w/w to 145,754.91 points.
As a result, the MTD and YTD returns settled higher at +4.2% and +41.6%, respectively. Market activity was mixed, as trading volume increased by 80.2% w/w, while trading value declined by 10.1% w/w. On sectors, performance was broadly positive, as the Insurance (+41.0%), Industrial Goods (+8.7%), Consumer Goods (+8.3%), and Oil & Gas (+0.2%) indices advanced, while the Banking (-0.8%) index was the sole loser of the week.
In the week ahead, we expect choppy trading, as investors book profits on recent gainers, though, bargain hunting in select counters is likely to persist. Over the medium term, we expect the sustained moderation in fixed income yields to support continued rotation into equities.
Money Market and Fixed Income
The overnight (OVN) rate expanded by 10bps w/w to 27.0% as the CBN conducted an OMO auction, mopping up NGN2.12 trillion from the system. Consequently, the average system liquidity weakened, settling at a net long position of NGN566.91 billion (compared to a net long position of NGN1.19 trillion in the previous week).
In the absence of further mop-up activities by the CBN, we expect system liquidity to remain sturdy, causing the OVN rate to remain depressed.
Treasury Bills
Proceedings in the Treasury bills secondary market were mixed driven by selloffs by market participants to participate in the OMO and NTB auctions conducted during the week. Accordingly, the average yield across all instruments declined by 2bps to 21.4%. Across the market segments, the average yield advanced by 15bps to 17.9% in the NTB segment, while it declined by 17bps to 24.6% in the OMO segment.
At Wednesday’s NTB auction, the CBN offered bills worth NGN220.00 billion – NGN60.00 billion for the 91D, NGN20.00 billion for the 182D, and NGN140.00 billion for the 364D bills. Total subscription levels settled at NGN366.55 billion (previous auction: NGN675.66 billion), indicating a bid-to-offer ratio of 1.7x (previous auction: 2.3x). The auction closed with the CBN under-alloting to the tune of NGN173.83 billion – NGN15.33 billion for the 91D, NGN18.32 billion for the 182D, and NGN139.59 billion for the 364D papers – at respective stop rates of 15.00% (unchanged), 15.50% (unchanged) and 16.50% (previous: 15.88%).
Also, the CBN conducted an OMO auction on Tuesday, offering instruments worth NGN600.00 billion – NGN300.00 billion for the 105D and NGN300.00 billion for the 245D. Total subscription levels settled at NGN2.28 trillion (bid-to-offer ratio: 3.8x), with the CBN allotting NGN2.12 trillion for the 245D bill only, at a stop rate of 23.7%.
Next week, we expect the strong system liquidity to buoy demand for bills, causing yields to taper slightly.
Bonds
The FGN bond secondary market was bearish this week as the stronger-than-expected print of the OMO PMA increased sell pressures. Accordingly, the average yield for bonds advanced by 12bps to 16.5%. Across the benchmark curve, the average yield increased at the short (+24bps) and mid (+2bps) segments driven by demand for the MAR-2027 (+33bps) and APR-2032 (+46bps) bonds, respectively, while it closed flat at the long end.
Over the medium term, we expect moderation in bond yields, influenced by – (1) the anticipated dovish monetary policy stamce and (2) demand and supply dynamics.
Foreign Exchange
The naira depreciated by 1.0% w/w to NGN1,535.00/USD as FX demand slightly surpassed supply from FPIs looking to participate in the OMO PMA and the USD150.00 million intervention from the CBN to banks. Meanwhile, gross FX reserves increased for the fifth consecutive week, growing by USD800.51 million w/w to USD40.16 billion (August 7). In the forwards market, the naira rates depreciated across the 1-month (-0.5% to NGN1,575.24/USD), 3-month (-1.2% to NGN1,647.47/USD), 6-month (-2.3% to NGN1,755.29/USD) and 1-year (-3.9% to NGN1,960.26/USD) contracts.
We remain optimistic about the naira, supported by expectations of sustained FX liquidity. Elevated yields, especially in the OMO market, and a softer US dollar are likely to continue attracting foreign portfolio inflows into the FX market in the near term. Additionally, improved market confidence and limited incentives for naira speculation are expected to reinforce steady inflows from domestic sources.
Cordros
