Global Economy
In line with market expectations, the Federal Open Market Committee (FOMC), at its May 2025 meeting, voted to maintain the target range for the federal funds rate at 4.25% – 4.50%, leaving the rate unchanged for the fourth consecutive time. The Committee noted that, excluding the contraction in net exports in Q1-25, economic activity continues to expand at a solid pace, while labour market conditions remain robust and the unemployment rate stable.
However, the FOMC acknowledged that uncertainty regarding the economic outlook has intensified, with risks now tilted toward both higher unemployment and persistently elevated inflation. Inflation remains above the 2.0% target, prompting a more cautious approach. The Committee reaffirmed its commitment to the dual mandate of maximum employment and price stability while emphasizing a data-driven approach to future policy decisions.
Given the underlying tone of the Committee, coupled with the resilient labour market and lingering inflationary pressures, we expect the FOMC to keep rates unchanged in the near term, allowing time to assess the economy’s performance and trajectory more thoroughly, particularly as it evaluates the broader implications of the tariff policies and lingering global uncertainties. Indeed, the CME FedWatch tool indicates an 82.9% chance that the Fed will “HOLD” the key interest rate at the June policy meeting.
Meanwhile, the Monetary Policy Committee (MPC) of the Bank of England (BoE) voted by a majority of 5 – 4 to reduce the bank rate by 25bps to 4.25% (Previous: 4.50%) at its May 2025 meeting. The decision reflects rising concern over weakening economic momentum, with the BoE citing slower global growth and the anticipated drag from new import tariffs as key downside risks. Although GDP remains relatively resilient and wage growth continues to moderate, the MPC is still divided in its inflation outlook. Two members voted to keep rates unchanged, preferring to wait for clearer evidence on services inflation and underlying price pressures.
In contrast, the two members who supported a larger 50bps cut and the four who voted for a 25bps reduction shared the view that keeping monetary policy tight for too long could unnecessarily constrain economic activity, particularly given signs of a softening labour market and slowing wage growth. The BoE reaffirmed that it is not committed to a fixed path of rate cuts, stating that future decisions will remain data dependent.
In our view, the bank rate will likely stay restrictive, given the BoE’s cautious tone regarding existing downside inflationary risks from global developments. Accordingly, we expect the BoE to hold the rate at the June meeting, with another potential cut in H2-25, depending on global developments and the magnitude of improvements in economic data.
Global Market
Global stock markets posted mixed performance this week as investors weighed monetary policy signals from major central banks, including the US Federal Reserve and the Bank of England (BOE), alongside developments in global trade. At the time of writing, US equities exhibited mixed performance (DJIA: +0.1%; S&P 500: -0.4%), with gains supported by positive sentiment around President Trump’s new trade agreement with the United Kingdom and cautious optimism ahead of US-China trade talks, while downside pressure came from early-session losses following President Trump’s 100.0% tariff announcement on foreign films and a selloff in Alphabet shares amid competitive concerns.
Elsewhere, European equities (STOXX Europe 600: -0.1%; FTSE 100: -0.8%) are set to close the week lower, reflecting investor’ caution on the Bank of England’s rate cut and outlook alongside mixed sentiment around the UK’s new trade agreement with the US. Meanwhile, Asian markets (Nikkei 225: +1.8%; SSE: +1.9%) advanced, buoyed by (1) renewed optimism around US-China trade negotiations, (2) the People’s Bank of China’s plans to lower key interest rates to spur economic growth, and (3) anticipation of fresh fiscal stimulus measures from Beijing. Lastly, the Emerging and Frontier market (MSCI EM: 0.0%; MSCI FM: 0.0%) indices ended the week flat, reflecting cautious global investment sentiments.
Nigeria: Domestic Economy
This week, the Nigerian Senate approved four major tax reform bills, including the (1) Nigeria Revenue Service (Establishment) Bill, (2) Nigeria Tax Administration Bill, (3) Nigeria Tax Bill 2024, and (4) Joint Revenue Board (Establishment) Bill; which aim to streamline tax administration, simplify compliance, and boost revenue. Key highlights of the bills include: the creation of a centralized tax authority, harmonization of tax rules across government levels, and consolidation of various tax laws.
The Joint Revenue Board will coordinate revenue generation across federal and state governments. Notably, the VAT sharing formula will now be based on the “place of consumption” principle, with 10.0% (previous: 15.0%) allocated to the Federal Government, 55.0% (previous: 50.0%) to States, and 35.0% (unchanged) to Local Governments. Meanwhile, the VAT rate was retained at 7.5%, as the Senate rejected the proposal to raise it to 10.0%.
The Senate also introduced stricter penalties for tax offences, including fines for failure to register or file returns and imprisonment of up to three years for extreme violations. The bills now await harmonization by a joint committee of the Senate and House of Representatives before final review and eventual assent by the President. The implementation of the bills is expected to enhance tax efficiency by streamlining administrative processes, support economic growth through targeted tax exemptions outlined in the Nigeria Tax Bill, and strengthen revenue mobilisation over the medium to long term.
According to the National Communications Commission (NCC), the total active telephone subscribers increased by 1.1% m/m to 172.71 million in March (February: 170.89 million), reflecting the gradual recovery in the subscriber base following the conclusion of the NIN-SIM linkage program by mobile service providers in September 2024. Analyzing the market share by operators, MTN Nigeria led with 52.5% (90.49 million subscribers), Airtel Nigeria followed with 33.8% (58.26 million subscribers), Globacom with 12.0% (20.72 million subscribers) and 9mobile with 1.7% (2.96 million subscribers). At the same time, the total number of internet subscribers increased marginally by 0.6% m/m to 142.05 million in March (February: 141.25 million).
Year-to-date, the number of telephone subscribers increased by 4.7% to 172.71 million, while internet subscribers rose by 2.0% to 142.05 million, reflecting higher service usage and the impact of improved customer acquisition and retention strategies by operators. Looking ahead, we anticipate a continued rebound in the subscriber base driven by SIM reactivation efforts, particularly from leading operators like MTN Nigeria and Airtel Nigeria. Nonetheless, we highlight that the new regulation restricting SIM registration by third-party agents/dealers to one SIM card per customer poses a downside risk.
Capital Markets: Equities
The Nigerian equities market was mostly positive this week, with gains recorded in four out of the five trading sessions, supported by strong buying interest in market large caps, including MTNN (+11.7%), GTCO (+7.9%), DANGCEM (+1.9%), NESTLE (+10.0%), and TRANSCOHOT (+5.9%). As a result, the All-Share Index (ASI) advanced by 2.5% w/w to 108,733.40 points, pushing month-to-date and year-to-date returns to +2.8% and +5.6%, respectively. Market activity was robust, with trading volume and value increasing by 20.7% and 2.5%, w/w, respectively. Similarly, sectoral performance mirrored the positive market sentiment, as the Consumer Goods (+5.4%), Oil & Gas (+4.0%), Banking (+3.1%), Industrial Goods (+1.1%), and Insurance (+1.0%) indices all closed the week higher.
In the coming week, we anticipate a more cautious trading environment, with the potential for selective stock picking alongside profit-taking from the recent rally, as investors seek to lock in gains amid the absence of significant positive catalysts to sustain the current momentum.
Money Market and Fixed Income
The overnight (OVN) rate expanded by 12bps w/w to 27.0% as debits for the net NTB issuance (NGN48.33 billion) pressured system liquidity. Accordingly, the average system liquidity, though still healthy, settled at a lower net long position of NGN915.26 billion (vs a net long position of NGN1.36 trillion in the previous week).
Barring any mop-up activities by the CBN, we expect inflows from FGN bond coupon payments (NGN143.13 billion) to keep system liquidity robust, causing a decline in the OVN rate.
Treasury Bills
The Treasury bills secondary market traded with bullish sentiments as market participants looked to fill unmet bids at the NTB PMA. Consequently, the average yield across instruments declined by 18bps to 23.5%. Across the market segments, the average yield declined by 10bps and 18bps to 21.0% and 26.9% at the NTB and OMO segments, respectively. At Wednesday’s NTB auction, the CBN offered bills worth NGN550.00 billion – NGN50.00 billion for the 91D, NGN100.00 billion for the 182D, and NGN400.00 billion for the 364D bills.
Total subscription levels settled lower at NGN1.09 trillion (previous auction: NGN1.54 trillion), indicating a bid-to-offer ratio of 2.0x (previous auction: 3.9x). The auction closed with the CBN over-allotting to the tune of NGN598.33 billion – NGN77.22 billion for the 91D, NGN38.49 billion for the 182D, and NGN482.62 billion for the 364D papers – at respective stop rates of 18.00% (unchanged), 18.50% (unchanged) and 19.63% (previous: 19.60%). The CBN also conducted an OMO auction on Tuesday (6 May), offering instruments worth NGN500.00 billion – NGN250.00 billion for the 315D and NGN250.00 billion for the 329D – to investors. Total subscription settled at NGN773.74 billion (bid-to-offer: 1.5x), with the CBN allotting NGN756.74 billion – NGN40.35 billion for the 315D and NGN716.39 billion for the 329D.
Looking ahead, we expect the improved liquidity position to buoy demand for bills, causing yields to taper, albeit moderately.
Bonds
Conversely, the FGN bond secondary market was bearish, driven by investor’s demand for mid-dated bonds. As a result, the average yield advanced by 2bps to 19.1%. Across the benchmark curve, the average yield increased at the short (+12bps) and long (+2bps) ends, driven by selloffs of the MAR-2027 (+59bps) and APR-2037 (+15bps) bonds, respectively, while it decreased at the mid (-7bps) segment following demand for the APR-2032 (-47bps) bond.
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 in Q2-25.
Foreign Exchange
The naira depreciated by 1.3% w/w to NGN1,610.50/USD, even as the CBN intervened, selling c. 200.00 million dollars to the market. Meanwhile, gross FX reserves increased for the second consecutive week, growing by USD86.67 million w/w to USD38.10 billion (6 May). In the forwards market, the naira rates appreciated across the 1-month (+0.2% to NGN1,641.59/USD), 3-month (+0.2% to NGN1,707.37/USD), 6-month (+0.8% to NGN1,799.21/USD) and 1-year (+1.7% to NGN1,988.66/USD) contracts.
We believe the persistent global pressures will continue to pose downside risks to naira stability in the near term, given their impact on capital flows. Nonetheless, relatively stronger FX reserves should bolster the CBN’s capacity to manage excess naira volatility through sustained market interventions in the near term.
Cordros
