Global Economy
According to the Bureau of Labor Statistics (BLS), US headline inflation held steady at 2.7% y/y in July, unchanged from June (+2.7% y/y) and undershooting consensus expectations (+2.8% y/y). The flat headline print primarily reflected softer food inflation and a deeper contraction in energy costs, partially offset by an uptick in core inflation.
Breaking down the components, food inflation (+2.9% y/y vs June: +3.0% y/y) eased on slower increases in food-at-home prices (+2.2% y/y vs June: +2.4% y/y), while the cost of food away from home (+3.9% y/y vs June: +3.8% y/y) rose slightly. Core inflation (+3.1% y/y vs June: +2.9% y/y) accelerated, driven by higher shelter, medical care, and household furnishings costs. Meanwhile, energy inflation (-1.6% y/y vs June: -0.8% y/y) fell deeper into negative territory, primarily due to weaker gasoline prices. On a month-on-month basis, headline inflation slowed to 0.2% in July (June: +0.3% m/m), signalling softer near-term price pressures.
Looking ahead, inflation is likely to hover around current levels, as soft energy prices counterbalance sustained service-sector pressures. That said, the gradual pass-through of recent tariffs — particularly on household furnishings, apparel, and select electronics — may slow the pace of disinflation in core prices. Consistent with market sentiment, the interplay of softer-than-expected inflation and a weakening labour market has strengthened expectations for near-term policy easing, with the CME FedWatch Tool pricing a 92.6% probability of a rate cut at the September 17 meeting.
According to the Office for National Statistics (ONS), the United Kingdom’s real GDP grew by 0.3% q/q in Q2-25 (Q1-25: +0.7% q/q), outperforming market expectations (+0.1% q/q), but marking a deceleration from the prior quarter’s front-loaded growth, which had been boosted by activity pulled forward ahead of April’s stamp duty charges and anticipated US tariff adjustments. Specifically, the moderation was driven by slower gains in household consumption (+0.06% q/q vs Q1-25: +0.22% q/q) and net exports (+0.02% q/q vs Q1-25: 0.34% q/q), alongside a contraction in gross fixed capital formation (-0.21% q/q vs Q1-25: 0.37% q/q).
Conversely, government expenditure rebounded (+0.27% q/q vs Q1-25: -0.08% q/q), supported by higher allocations to health, public administration and defence. On a year-on-year basis, growth eased to 1.2% y/y in Q2-25 (Q1-25: +1.3% y/y), weighed by weaker production output, softer external demand, and subdued investment sentiment amid the dampening effects of new US tariffs. The UK’s growth outlook has strengthened, supported by the easing of US tariffs under the US–UK Economic Prosperity Deal and the potential for additional Bank of England (BOE) rate cuts.
These factors are expected to bolster business investment and consumer confidence, reinforcing economic resilience in the near to medium term. Reflecting this improved outlook, the IMF has revised its 2025 growth forecast to 1.2% y/y (previous: +1.1% y/y), citing sustained momentum despite lingering tariff-related pressures.
Global Markets
Global equities advanced on optimism that that the three-year war in Ukraine may be approaching a resolution, amid speculation that an upcoming meeting between US and Russian leaders in Alaska could improve the outlook for peace talks. Sentiment was further buoyed by softer-than-expected CPI data, which strengthened expectations of imminent Federal Reserve rate cuts and lifted US equities (DJIA: +1.7%; S&P 500: +1.2%) toward a higher weekly close. Investors also awaited retail sales data for additional insight into the economy’s underlying momentum.
Similarly, European equities (STOXX Europe 600: +1.6%; FTSE 100: +1.2%) gained, supported by stronger-than-expected UK GDP growth and optimism surrounding the upcoming US-Russia talks. Asian markets (Nikkei 225: +3.7%; SSE Composite: +1.7%) also posted gains, mirroring Wall Street gains, and drawing support from the extended US-China trade truce. Meanwhile, the Emerging Market (MSCI EM: +1.5%) and Frontier Market (MSCI FM: +1.4%) indices advanced, driven by notable gains in China (+1.7%) and Vietnam (+3.5%), respectively.
Nigeria: Domestic Economy
According to the National Bureau of Statistics (NBS), Nigeria’s Consumer Price Index (CPI) eased for the fourth consecutive month, moderating by 34bps to 21.88% y/y in July (June: 22.22% y/y). The slowdown was driven by a sharp deceleration in core inflation, which fell by 143bps to 21.33% y/y (June: 22.76% y/y), reflecting lower costs in Housing, Water, Electricity, Gas and Other Fuels. Although food inflation accelerated on a year-on-year basis (77bps to 22.74% y/y vs June: 21.97% y/y), it moderated by 14bps to 3.12% m/m, reflecting lower increases in imported food prices.
On a monthly basis, headline inflation increased by 31bps to 1.99% (June: 1.68% m/m), indicating persistent underlying price pressures despite the annual moderation. Inflation is expected to ease in the near term, driven by naira stability, improved food supply from the green harvest, and moderate energy price increases. The stability of the naira is expected to keep the prices of imported items steady and anchor inflation expectations, while softer energy price pressures and higher crop availability are expected to further temper both core and food inflation.
According to data from the Central Bank of Nigeria (CBN), Credit to the Private Sector (CPS) increased by 4.0% y/y to NGN76.14 trillion in June (June 2024: NGN73.19 trillion). We attribute the moderate growth to the diminished impact of currency depreciation on banks’ foreign-denominated assets, driven by the recent stabilisation of the naira and the CBN’s tight monetary policy stance.
At the same time, credit to the government declined moderately by 0.9% y/y to NGN23.72 trillion (June 2024: NGN23.93 trillion), indicating reduced government borrowing from domestic banks for deficit financing. Overall, broad money supply (M3) rose by 15.8% y/y to NGN117.50 trillion, following increases across quasi (+20.0% y/y) and narrow (+8.5% y/y) money supply. On a month-on-month basis, the CPS declined by 2.2% to NGN76.14 trillion in June (May: -0.3% m/m to NGN77.83 trillion). We expect CPS growth to remain subdued in the near term, constrained by the current tight monetary policy stance. However, a potential shift toward monetary easing later in the year could support a gradual recovery in CPS growth over the medium term.
Capital Markets: Equities
The local bourse opened the week on a strong footing, supported by sustained buying interest — particularly in insurance stocks — following prior week’s approval of the Nigerian Insurance Industry Reform Act (NIIRA). However, momentum faded midweek as profit-taking in Oil and gas, consumer goods, industrial goods and banking stocks tempered overall gains. Thus, the NGX ASI closed the week 0.8% lower w/w, weighed down by losses in MTNN (-3.3%), WAPCO (-5.2%), ZENITHBANK (-3.0%), GTCO (-2.3%) and OANDO (-6.9%). Consequently, the MTD and YTD returns moderated to +3.4% and +40.5%, respectively.
Market activity was mixed, with trading volume rising 76.7% w/w while value traded declined 33.2% w/w. Sector performance was largely negative, as the Oil & Gas (-1.4%), Consumer Goods (-0.9%), Industrial Goods (-0.8%), and Banking (-0.2%) indices all closed lower, leaving the Insurance index (+8.2%) as the sole gainer.
In the near term, we expect profit-taking to persist, largely concentrated in counters lacking strong fundamentals, while selective buy interest is likely to emerge in fundamentally sound equities. Over the medium term, sentiment will likely be shaped by macroeconomic developments — including growth, inflation, and policy direction — as well as movements in fixed income yields, which could further influence asset (re)allocation decisions between equities and debt instruments.
Money Market and Fixed Income
The overnight (OVN) rate rose sharply by 550bps w/w to 32.4%, reflecting liquidity pressures from CBN FX sales (NGN153.00 billion), alongside increased uptakes at CBN Standing Lending Facility (SLF) window (weekly average: NGN294.80 billion vs NGN34.13 billion in the prior week). Consequently, average system liquidity deteriorated, closing the week at a net long position of NGN62.94 billion (compared to a net long position of NGN566.91 billion in the previous week).
Next week, barring any mop-up activity by the CBN, we expect significant inflows from OMO maturities (NGN854.46 billion) to bolster system liquidity, thus exerting pressure on the OVN rate.
Treasury Bills
The Treasury bills secondary market traded in a lull with a bearish undertone as the average yield across all instruments expanded by 1bp w/w to 21.4%. Across the market segments, the weekly average yield expanded by 4bps to 18.0% in the NTB segment while it declined by 2bps to 24.6% in the OMO segment.
With system liquidity expected to improve, demand for Treasury bills is likely to resurface, exerting downward pressure on yields. At next Wednesday’s (20 August) NTB primary market auction, where the DMO will roll over NGN230.00 billion in maturities, we anticipate a moderate tapering of stop rates.
Bonds
The FGN bond secondary market turned bearish after the DMO unveiled a revised Q3 bond issuance calendar, doubling the offer size per auction to NGN80.00–NGN120.00 billion (previous: NGN40.00–NGN60.00 billion). The update also introduced a new 5-year bond (AUG-2030) while removing the previously listed APR-2029 bond from the schedule. Accordingly, the average yield expanded by 11bps to 16.6%. Across the benchmark curve, the average yield contracted at the short (-1bp) end, driven by the demand for the JAN-2026 (-6bps) bond, while it expanded at the mid (+35bps) and long (+11bps) segments following the selloffs of the APR-2032 (+63bps) and APR-2037 (+53bps) bonds, respectively.
In the coming week, improved liquidity is expected to encourage selective buying, although the larger Q3 bond issuance programme is likely to temper bullish sentiment. 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.
Foreign Exchange
The naira depreciated by 0.1% w/w to NGN1,536.53/USD, despite improved supply, as the CBN sold c. USD166.00 million to the market. Meanwhile, gross FX reserves increased for the sixth straight week, rising by USD431.86 million w/w to USD40.72 billion (13 August). In the forwards market, the naira rates depreciated across the 1-month (-0.1% to NGN1,577.15/USD), 3-month (-0.3% to NGN1,652.88/USD), 6-month (-0.5% to NGN1,764.11/USD) and 1-year (-0.8% to NGN1,975.38/USD) contracts.
The naira is expected to remain stable, underpinned by robust FX liquidity and an efficient FX market. Specifically, we expect sustained inflows from foreign portfolio investors (FPIs) due to existing carry trade opportunities and stronger market confidence. Additionally, improving non-oil exports, as well as limited incentives for naira speculation, are expected to reinforce steady inflows from domestic sources.
Cordros
