Global Economy
The US Fed released the September 16–17 FOMC minutes on 8 October, confirming a 25bps cut in the federal funds rate to 4.00%–4.25% amid slowing economic activity and persistently elevated inflationary pressures. The minutes highlighted slower job gains and emerging downside risks to employment, signalling a gradual moderation in the labour market despite continued resilience.
Financial markets had largely anticipated the rate reduction, reflected in modest declines in short-term Treasury yields and pricing in expectations of a potential additional rate cut in the coming months. The FOMC reiterated a data-driven and flexible policy approach, emphasizing its dual mandate of maximum employment and a 2.0% inflation target, while closely monitoring incoming economic and financial developments.
Looking ahead, the Fed is likely to maintain a cautious stance, balancing support for economic growth and inflation risk. As such, any further adjustments to the policy rate will be contingent on evolving economic conditions over the coming months.
According to Eurostat, Euro Area retail sales rose modestly by 1.0% y/y in August (July: +2.1% y/y), reflecting softer consumer confidence and uneven performance across member states. Disaggregated data showed that sales of food, drinks, and tobacco inched up by 0.1% y/y (July: +0.6% y/y), while non-food products expanded by 1.9% y/y (July: +3.4% y/y) and automotive fuels rose by 0.8% y/y (July: +1.7% y/y). Across the region’s major economies, Spain (+4.6% y/y vs July: +4.6% y/y) and Germany (+1.8% y/y vs July: +2.9% y/y) recorded stronger sales, while retail sales in France (-1.4% vs July: +1.2% y/y) declined.
On a month-on-month basis, retail sales increased by +0.1% m/m (July: -0.4% m/m), driven by increase in automotive fuel sales (+0.4% m/m vs July: -1.6% m/m) and food, drinks and tobacco sales (+0.3% m/m vs July: -1.1% m/m) which offset the decline in non-food products (-0.1% m/m vs July: +0.3% m/m). Looking ahead, gradual improvements in real income growth and easing inflation expectations could support a slow recovery in retail activity toward the end of the year, dependent on resilient labor market conditions and an uplift in consumer confidence.
Global Market
Global equities traded on a cautious but broadly positive note this week, as investors balanced optimism over the AI-driven rally and prospects of near-term interest rate cuts against lingering uncertainty from the prolonged US government shutdown. At the time of writing, U.S. equities were poised to close mixed, with the S&P 500 (+0.3%) edging higher as investor enthusiasm around AI-related deals fueled gains in semiconductor and AI-linked stocks, while the Dow Jones Industrial Average (–0.9%) underperformed, dragged down by losses in Home Depot, Verizon, and Oracle — following weaker-than-expected cloud margin results.
European equities (STOXX Europe 600: +0.2%; FTSE 100: +0.2%) were on track to close slightly higher, supported by gains in energy and financial stocks which offset political uncertainty in France and subdued macroeconomic data. Elsewhere, Asian markets (SSE: +0.3%; Nikkei 225: +5.1%) advanced, supported by optimism surrounding AI expansion and renewed policy support signals.
Precisely, Japanese equities rallied after fiscal dove Sanae Takaichi won the LDP leadership race, raising expectations for continued stimulus, while Chinese stocks gained as markets reopened from the Golden Week holiday to improved manufacturing data and sustained inflows into AI and semiconductor names. Finally, the Emerging and Frontier Markets (MSCI EM: +0.1%; MSCI FM: +0.1%) indices advanced, supported by gains in China (+0.2%) and Vietnam (+5.4%), respectively.
Domestic Economy
The Purchasing Manager’s Index (PMI) printed above the 50-point threshold for the tenth consecutive month, rising to its highest level in 21 months, indicating sustained expansion of business activities in the economy. According to CBN, the composite PMI increased to 54.0 points in September (August: 51.7 points), driven by broad-based expansion in aggregate economic activity. Specifically, the Industry PMI (51.4 points vs August: 49.1 points) returned to an expansionary level after a month of contraction, due to strengthened consumer demand, which supported output, raw materials and employment indicators.
The Services sector PMI (54.7 points vs August: 51.9 points) expanded for the eighth straight month, reflecting resilient sector output, new orders, inventories and employment. The expansion demonstrates improvements in activities across Educational services, Motion pictures, Cinema, Sound recording & Music production, and Information & Communication sub-sectors. Elsewhere, the Agriculture sector PMI (54.8 points vs August: 53.9 points) expanded for the 14th consecutive month, reflecting sustained improvement in general farming activities, inventories, new orders and employment level.
Looking ahead, private sector activity is expected to sustain its expansion, supported by improving macroeconomic conditions, including naira stability and easing inflationary pressures. Furthermore, the recent dovish tilt in monetary policy is likely to gradually ease tight financial conditions, supporting broader economic activity in the near term.
According to data from FMDQ, total inflows into the Nigerian Foreign Exchange Market (NFEM) declined by 5.7% m/m to USD3.18 billion in September (August: USD3.37 billion), primarily reflecting the declines in inflows from local sources (44.8% of total inflows). Specifically, inflows from local sources dipped by 32.4% m/m to USD1.42 billion (August: USD2.10 billion) due to declines across the CBN (-54.4% m/m), non-bank corporates (-48.4% m/m) and Exporters/Importers (-3.2% m/m) segments despite the higher accretion recorded in the individuals (+97.3% m/m) segment.
On the other hand, inflows from foreign sources (55.2% of total inflows) increased by 38.9% m/m to USD1.75 billion (August: USD1.26 billion), as the increase from FDIs (+12.2ppts m/m) and FPIs (+22.3% m/m) segments were enough to offset the decline in the other corporates (-16.9% m/m) segment. Specifically, the increases in fixed income (+25.4% m/m) and Equity investment (+1.3% m/m) sub-segments drove the improvement in the inflows from FPIs. In the near term, we expect foreign exchange inflows from both local and foreign sources to remain strong, surpassing 2024 levels (2024FY average: USD2.51 billion), driven by increased market confidence and still attractive carry trade opportunities.
Capital Markets: Equities
Positive sentiments prevailed in the Nigerian equities market for the fifth consecutive week, as the market closed higher in all five trading sessions. Precisely, the All-Share Index advanced by 2.4% w/w to 146,988.04 points, driven by gains in MTNN (+10.8%), DANGCEM (+9.5%), SEPLAT (+10.0%), WAPCO (+2.7%), and STANBIC (+2.3%).
Consequently, the month-to-date and year-to-date returns strengthened to +3.0% and +42.8%, respectively. However, overall market activity moderated, with trading volume and value declining by 72.8% w/w and 21.1% w/w, respectively. Across sectors, performance was broadly positive, with the Industrial Goods (+4.2%), Insurance (+3.7%), Oil & Gas (+2.9%), and Consumer Goods (+0.8%) indices registering gains, while the Banking (-0.4%) index closed lower.
Looking ahead, market sentiment is expected to remain broadly positive, driven by projections of strong third-quarter corporate earnings that could validate the underlying resilience of corporate fundamentals. At the same time, investors will closely monitor September inflation data, as further moderation could boost the probability of a MPC rate cut in November.
Money Market and Fixed Income
The OVN rate expanded by 8bps to 25.0% as debits for the OMO PMA (NGN3.94 trillion) and net NTB issuance (NGN339.34 billion) undermined the combination of strong system liquidity at the start of the week and inflows from OMO maturities (NGN905.23 billion). Given the sizeable OMO debits, the system’s net long position declined significantly to an average of NGN3.82 trillion (vs. NGN6.28 trillion in the previous week).
In the event of no mop-up activity by the CBN next week, we expect liquidity to remain sturdy, supported by NGN37.09 billion in FGN bond coupon inflows. As a result, the OVN rate is likely to hold near current levels.
Treasury Bills
The Treasury bills secondary market traded bullishly this week, as unmet demand from the NTB PMA was absorbed in the secondary market. Consequently, the average yield decreased by 21bps w/w to 18.9%. By segment, NTB yields fell 41bps to 17.4%, while OMO yields advanced by 7bps to 20.6%. At Wednesday’s NTB auction, the CBN offered bills worth NGN570.00 billion – NGN100.00 billion for the 91D, NGN120.00 billion for the 182D, and NGN350.00 billion for the 364D bills. Total subscription moderated to NGN1.06 trillion (previous auction: NGN1.59 trillion), indicating a bid-to-offer ratio of 1.9x (previous auction: 5.9x).
The auction closed with the CBN allotting exactly what was offered – NGN25.37 billion for the 91D, NGN41.33 billion for the 182D, and NGN503.30 billion for the 364D papers – at respective stop rates of 15.00% (unchanged), 15.25% (previous: 15.30%) and 15.77% (previous: 16.78%). The CBN also conducted an OMO auction on October 6, offering NGN600.00 billion worth of bills. Total subscriptions reached NGN4.13 trillion, representing a bid-to-offer ratio of 6.9x. Eventually, only NGN998.10 billion was allotted, with stop rates of 20.08%, 20.13%, and 20.17% on the 85D, 99D and 120D maturities, respectively.
Additionally, on October 7, there was another NGN600.00 billion OMO auction which drew subscriptions of NGN4.43 trillion, with NGN3.04 trillion allotted – NGN1.34 trillion for the 168D and NGN1.70 trillion for the 196D at stop rates of 19.45% and 19.49%, respectively. The CBN ended the week with another OMO auction today (October 10), offering NGN600.00 billion worth of bills. Total subscriptions reached NGN2.08 trillion, representing a bid-to-offer ratio of 3.5x. Accordingly, NGN1.28 billion was allotted, with stop rates of 19.35%, 19.39%, and 19.44% on the 81D, 109D and 151D maturities, respectively.
With system liquidity expected to remain ample, demand for bills is likely to remain strong, reinforcing the ongoing moderation in yields
Bonds
Similarly, the FGN bond secondary market remained bullish, with the average yield declining 29bps w/w to 16.0%. Across the curve, the average yield declined at the short (-44bps), mid(-28bps), and long (-32bps) segments, driven by demand for the JAN-2026 (-83bps), JUL-2034 (-57bps), and MAR-2036 (-6bps) bonds, respectively.
We expect demand in the FGN bond secondary market to remain strong, owing to the robust system liquidity and the recent MPR cut. We also reiterate our expectations of a cautious stance at the long end of the curve, amid persistent concerns over fiscal sustainability and heightened duration risk.
Foreign Exchange
The naira depreciated marginally this week by 7bps to NGN1,458.00/USD as demand pressures emerged. Notably, we saw the CBN intervene this week, selling USD22.20 million to authorised banks. Also, the gross FX reserves increased for the thirteenth consecutive week, growing by USD31.63 million w/w to USD42.58 billion (October 9).
In the forwards market, the naira rates appreciated across the 1-month (+0.7% to NGN1,490.79/USD), 3-month (+0.9% to NGN1,537.97/USD), 6-month (+1.0% to NGN1,608.28/USD) and 1-year (+1.3% to NGN1,742.25/USD) contracts.
We maintain a positive outlook on the naira, supported by expectations of sustained FX liquidity. On the domestic front, rising non-oil exports and improving market confidence should underpin inflows, while externally, healthy FX reserves, a positive current account position, and a shift toward global monetary easing are expected to reinforce foreign investor sentiment and stimulate additional FX market inflows.
Cordros
