Global Economy
Consumer prices in China returned to positive territory in June for the first time in five months, indicating a temporary pause in deflationary pressures. According to the National Bureau of Statistics (NBS), headline inflation rose to 0.1% y/y in June (May: -0.1% y/y) – above market expectations (0.0% y/y). The modest rebound was supported by mid-year e-commerce promotions, expanded consumer subsidies from the government, and easing trade tensions with the US.
Analysing the breakdown, non-food inflation rose slightly to +0.1% y/y (May: 0.0% y/y), driven by higher prices in clothing, healthcare and housing sub-baskets. Meanwhile, food inflation declined at a softer pace (-0.3% y/y vs May: -0.4% y/y), with the slower contraction primarily reflecting a softer decline in vegetable price (-0.4% y/y vs May: -8.3% y/y), which helped offset the sharp downturn in pork prices (-8.5% y/y vs May: +3.5% y/y).
On a month-on-month basis, headline inflation declined slightly by 0.1% m/m (May: -0.2% m/m). Looking ahead, inflation is expected to remain mildly positive in the near term, supported by fiscal stimulus and a gradual recovery in consumer demand, amid improving global dynamics. Nonetheless, underlying deflationary risks persist, particularly amid subdued food prices and a slow recovery in core inflation.
According to the United States Department of Labor, initial jobless claims in the US declined by 5,000 to 227,000 in the week ending 5th July (vs. the week ending 28th June: 232,000) – below market expectations (229,000). While the decline suggests modest improvement, it likely reflects temporary seasonal distortions tied to the Independence holiday (July 4th). Notably, the print is above the 2024FY Average (223,370 claims), underscoring persistent labour market softening as re-employment opportunities appear increasingly scarce.
On a non-seasonally adjusted basis, notable declines were observed in New Jersey (-4,566), Texas (-1,259), and Florida (-1,025), while the most significant increases were recorded in Michigan (+8,798), Tennessee (+3,059), and New York (+2,396). Meanwhile, the 4-week moving average initial claims data shows a 5,750 decline to 235,500 (vs. week ending 28th June: 241,250). Looking ahead, we believe the underlying momentum in the labour market remains fragile, with rising layoff activity across manufacturing, services, and logistics, alongside signs of employer caution around new hiring. As such, jobless claims may stay elevated around current level, in the near term, reflecting the lagged impact of tight financial conditions on employment dynamics.
Global Markets
The global stock market was mixed this week, as President Trump reignited trade tensions by announcing a new wave of tariffs and extending his original July 9 deadline for many trading partners to August 1, providing additional time for negotiation. At the time of writing, US equities (DJIA: -0.4%; S&P 500: 0.0%) were on track to end the week lower, pressured by Washington’s (1) announcement of a 35.0% tariff on Canadian imports effective August 1, (2) plans to raise broad-based tariffs for some trading partners from 10.0% to a 15.0% – 20.0% range, and (3) threats of up to 200.0% tariffs on pharmaceutical products.
Meanwhile, European equities (STOXX Europe 600: +1.1%; FTSE 100: +1.7%) trended higher, buoyed by strong performances in mining, oil & gas, financials, and healthcare sectors amid optimism over progress in US–EU trade negotiations, with both sides reporting good progress on a framework agreement and suggesting a deal could be reached within days.
Elsewhere, Asian equities (Nikkei 225: -0.6%; SSE Composite: +1.1%) ended the week mixed, with the Japanese markets closing lower on stalled US–Japan trade talks, while Chinese equities advanced for the third consecutive week on expectations of fresh economic stimulus from Beijing. Finally, the Emerging market (MSCI EM: 0.0%) index closed flat as gains in China (+1.1%) were offset by losses in India (-0.7%) and Brazil (-2.7%), while the Frontier market (MSCI FM: +1.5%) index closed higher reflecting gains in Vietnam (+5.1%).
Nigeria: Domestic Economy
The Purchasing Manager’s Index (PMI) printed above the 50-point threshold for the seventh straight month, indicating continued expansion of business activities in the Nigerian economy. According to the CBN, the composite PMI expanded to 52.3 points in June (May: 52.1 points), primarily driven by the expansion in the Agriculture sector as the Industry and Services sectors moderated.
Specifically, the Agriculture sector PMI (55.2 points vs May: 53.4 points) expanded to an eighteen-month high, supported by improvements in general farming activities and inventories. The Services sector PMI (51.3 points vs May: 51.7 points) moderated, reflecting a slowdown in activities across the Accommodation & Food services, Educational services and Finance & Insurance sub-sectors. While the Industry PMI (51.4 points vs May: 51.6 points) remained in the expansionary territory, it pared due to ease in activities in Cement, Food beverage & Tobacco products and Paper products subsectors.
Looking ahead, we anticipate a sustained expansion of private sector activities, driven by improving macroeconomic conditions such as naira stability and easing inflationary pressures. However, persistently tight financial conditions remain a potential headwind to broader economic performance in the near term, pending a shift towards a more accommodative monetary policy stance.
According to the data from FMDQ, total inflows into the Nigerian Foreign Exchange Market (NFEM) declined by 28.1% m/m to USD4.84 billion in June (May: USD6.74 billion). The outturn was primarily due to a substantial decline in inflows from local sources (43.7% of total inflows).
Specifically, inflows from local sources dipped to a four month low, decreasing by 61.4% m/m to USD2.11 billion (May: USD5.48 billion) following declines in inflows across individuals (-91.6% m/m), CBN (-77.2% m/m), exporters/importers (-74.4% m/m) and non-bank corporates (-17.6% m/m) segments. On the other hand, inflows from foreign sources (56.3% of total inflows) surged by 116.8% m/m to USD2.73 billion (May: USD1.26 billion) – the highest level in twenty-nine months – supported by increased market confidence and the moderation in global pressures. As a result, the FPI (+133.6% m/m) segment recorded higher accretion, while inflows from other corporates (-39.8% m/m) and FDIs (-31.6% m/m) segments declined.
In the near term, we anticipate that foreign exchange inflows (particularly from FPIs) will continue to improve, supported by growing market confidence and elevated stop rates at OMO auctions. However, the lingering global trade uncertainties remain a downside risk to inflows from foreign counterparts, potentially constraining growth in the overall liquidity of the NFEM.
Capital Markets: Equities
The domestic stock market extended its bullish streak, closing higher for the seventh consecutive week with gains recorded in all five trading sessions of the week. Investor sentiment was supported by a combination of factors, including strategic positioning ahead of the upcoming H1 earnings season, strong price action in select small- and mid-cap stocks, as well as particular interests in banking tickers.
As a result, the All-Share Index advanced by 4.3% w/w to 126,149.59 points, driven by notable gains in MTNN (+10.5%), ZENITHBANK (+21.2%), GTCO (+13.1%), UBA (+19.6%), and WAPCO (+14.6%). The month-to-date and year-to-date returns settled higher at +5.1% and +22.6%, respectively. On trading activity, volume declined by 1.2%, while value increased by 0.1%. Meanwhile, sectoral performance was broadly bullish, as the Insurance (+13.8%), Banking (+12.5%), Industrial Goods (+2.9%), and Consumer Goods (+2.2%) indices posted gains, while the Oil & Gas (-0.7%) index was the sole loser of the week.
Next week, we expect the upward market momentum to persist as investors consolidate recent gains and adjust positions ahead of anticipated strong corporate results. Trading activity will likely be driven by ongoing portfolio rebalancing and bargain hunting across select counters.
Money Market and Fixed Income
The overnight (OVN) rate expanded by 475bps w/w to 32.2% as debits for the OMO PMA (NGN1.25 trillion) pressured system liquidity. As a result, the average system liquidity deteriorated, settling at a net long position of NGN148.29 billion (compared to a net long position of NGN713.92 billion in the previous week).
Barring any mop-up activities by the CBN, we expect inflows from FGN bond coupon payments (NGN65.36 billion) and FAAC remittances to boost system liquidity, causing the OVN rate to taper.
Treasury Bills
The Treasury bills secondary market remained bullish this week as investors looked to the secondary market to fill unsuccessful bids from the PMA. Accordingly, the average yield across all instruments declined by 136bps to 21.5%. Across the market segments, the average yield declined by 158bps and 103bps to 18.4% and 24.7% in the NTB and OMO segments, respectively. At Wednesday’s NTB auction, the CBN offered bills worth NGN250.00 billion – NGN100.00 billion for the 91D, NGN20.00 billion for the 182D, and NGN130.00 billion for the 364D bills.
Total subscription levels settled at NGN1.33 trillion (previous auction: NGN1.23 trillion), indicating a bid-to-offer ratio of 5.3x (previous auction: 7.6x). The auction closed with the CBN significantly under-alloting to the tune of NGN201.82 billion – NGN59.84 billion for the 91D, NGN15.67 billion for the 182D, and NGN126.31 billion for the 364D papers – at respective stop rates of 15.74% (previous: 17.80%), 16.20% (previous: 18.35%) and 16.30% (previous: 18.84%).
Also, the CBN conducted an OMO auction on Wednesday, offering instruments worth NGN600.00 billion – NGN300.00 billion for the 272D and NGN300.00 billion for the 363D. Total subscription levels settled at NGN2.17 trillion (bid-to-offer ratio: 3.6x), with the CBN allotting NGN1.25 trillion for the 363D bill only, at a stop rate of 21.99%.
We expect bullish sentiments to persist in the Treasury bills secondary market as investors continue repricing yields downwards, aided by the FG curtailing the supply of instruments.
Bonds
Similarly, the FGN bond secondary market was bullish as market participants increased the demand following the recently released Q3-25 bond auction calendar. Accordingly, the average yield for bonds declined by 72bps to 16.8%.
Across the benchmark curve, the average yield decreased at the short (-71bps), mid (-92bps), and long (-28bps) segments, driven by heightened demand for the JAN-2026 (-161bps), FEB-2031 (-120bps), and APR-2037 (-84bps) bonds, respectively. Notably, the DMO intends to reopen the APR-2029 and JAN-2032 bonds during the quarter, with c.NGN60.00 billion on offer across both instruments.
We also expect proceedings to remain bullish, driven by continued demand and reduced supply. Over the medium term, we expect continued moderation in bond yields, influenced by – (1) the anticipated dovish monetary policy stance and (2) demand and supply dynamics.
Foreign Exchange
The naira depreciated this week by 0.2% w/w to NGN1,531.00/USD, as demand pressures emerged, outweighing supply from FPIs looking to participate in the OMO PMA. Notably, the CBN intervened this week, selling c.USD50.00 million to the market.
Meanwhile, after seven consecutive weekly declines, gross FX reserves increased this week by USD147.79 million w/w to USD37.33 billion (July 10). In the forwards market, the naira rates depreciated across the 1-month (-0.4% to NGN1,572.31/USD), 3-month (-1.5% to NGN1,646.72/USD), 6-month (-2.5% to NGN1,751.58/USD) and 1-year (-3.8% to NGN1,952.87/USD) contracts.
We expect FX liquidity to record a positive rebound in the coming months, expanding even further as the reduced global strain and stronger market confidence continue to support robust inflows from FPIs. Factoring in CBN’s ability to intervene, we expect the naira to remain stable in the near term.
Cordros
