Global Economy
In line with market expectations, the Federal Open Market Committee (FOMC), at its September 2025 meeting, voted to cut the federal funds rate by 25bps to a range of 4.00% – 4.25%, lowering rates for the first time this year. The Committee noted that economic activities moderated in the first half of the year, coupled with slower job growth and an uptick in the unemployment rate.
At the same time, the Committee acknowledged the persistence of inflationary pressures and elevated geopolitical risks, both of which cloud the medium-term outlook. In reaffirming its dual mandate of maximum employment and price stability, the Fed emphasized it would continue to utilize its data-dependent approach. Importantly, it also signaled the potential for an additional 50bps of cuts before year-end, suggesting a cautious but deliberate easing cycle aimed at balancing inflation risks against slowing growth momentum.
Looking ahead, while policy decisions will remain data-dependent, the balance of risks increasingly tilts toward further monetary easing by the US Fed. Rising unemployment risks and softening growth prospects are likely to outweigh concerns about sticky inflation in the near term. Market expectations reinforce this view, with the CME FedWatch tool assigning a 91.9% probability of a 25bps rate cut at the October policy meeting.
The Bank of England (BoE), at its September policy meeting, voted by a clear 7–2 majority to keep the Bank Rate unchanged at 4.00%. Two members favoured a 25bps cut to 3.75%. The decision underscores the MPC’s cautious stance amid persistent inflationary pressures.
At the same time, the Committee noted that GDP growth remains weak, reflecting softer labour market conditions and an economy still operating below potential. In its forward guidance, the Committee stressed that the timing and scale of eventual rate cuts remain uncertain and will depend on the extent to which underlying disinflationary pressures materialise.
While the Committee has flagged concerns over subdued economic activity and emerging signs of labour market weakness, we expect it to adopt a cautious stance given the slow pace of disinflation and the need for continuous reassessment of inflation dynamics. Against this backdrop, we anticipate the Bank of England will hold rates steady at its October policy meeting, maintaining a wait-and-see approach until clearer evidence of disinflation emerges.
Global Market
Trading was mixed across global equity markets this week, as investors balanced central bank policy decisions with fresh economic data releases and trade developments. In the US, major indices (DJIA: +0.1%; S&P 500: +0.7%) were on track to close the week higher, as market participants digested the Federal Reserve widely anticipated rate cut, and signals for further easing later in the year.
Sentiment was further shaped by President Trump’s remarks on progress with US–China trade talks, and stronger-than-expected August retail sales. Meanwhile, European equities (STOXX Europe 600: -0.1%; FTSE 100: -1.0%) came under pressure as investors digested the Bank of England’s decision to hold rates, softer UK labour market data, and selloffs in banks and insurers on concerns over compressed margins in a lower-rate environment. In Asia, Chinese equities (SSE: -1.3%) slumped as investors locked in profits amid concerns about the sustainability of the recent rally.
Mixed economic prints, including retail sales and industrial production, both missing forecasts, added to the cautious tone, while speculation about potential policy moves to curb market excesses further negatively pressured sentiment. By contrast, Japanese stocks (Nikkei 225: +0.6%) tracked Wall Street’s modest gains, buoyed by technology shares and optimism around global trade. Finally, the Emerging and Frontier Markets (MSCI EM: +2.7%; MSCI FM: +0.5%) indices advanced, driven by gains in India (+0.8%) and Romania (+1.3%), respectively.
Domestic Economy
According to the National Bureau of Statistics (NBS), Consumer Price Index (CPI) eased for the fifth consecutive month, moderating by 175bps to 20.12% y/y in August (July: 21.88% y/y). The outcome was primarily driven by a slowdown in food prices and core inflation. Analysing the breakdown, food prices moderated by 87bps to 21.87% y/y (July: 22.74% y/y) primarily driven by slowdown in both imported food and farm produce basket, while core inflation fell sharply by 100bps to 20.33% y/y (July: 21.33% y/y), reflecting lower import costs of non-food items given the stability of the naira.
On a month-on-month basis, headline inflation fell by 125bps to 0.74% (July: 1.99% m/m), marking the lowest monthly print since February 2019. In the near term, we expect inflation to continue its downward trajectory, supported by a favourable base effect, a stable naira, and stable energy costs. In addition, improved food supply from the commencement of the main harvest season should provide further relief. Overall, we expect the headline inflation to fall below the 20.0% threshold in September as core and food inflation ease further.
According to the released trade report by the National Bureau of Statistics (NBS), total foreign trade rose by 20.1% y/y to NGN38.04 trillion in Q2-25 (Q2-24: NGN31.68 trillion | Q1-25: NGN36.02 trillion). We highlight that part of this increase reflects currency translation effects from the naira’s depreciation (-11.7% y/y to NGN1,575.27/USD in Q2-25 vs Q2-24: NGN1,390.92/USD).
Specifically, total trade increased by 6.0% y/y to USD24.15 billion (Q2-24: USD22.78 billion) in US dollar terms, supported by the rise in total exports (+13.4% y/y to USD14.44 billion), amid the decline in total imports (-3.4% y/y to USD9.70 billion). We attribute the increase in total exports to the rise in other oil exports (+86.5% y/y) and non-oil exports (+37.1% y/y) despite the decline in crude oil exports (-16.2% y/y), which was driven by lower crude oil prices (Q2-25: USD66.71/bbl vs Q2-24: USD84.94/bbl). On the other hand, the slowdown in imports was due to the decline in petroleum imports (-33.9% y/y), given the increase in domestic refining activities.
This outweighed the rise in non-oil imports (+18.3% y/y), which was buoyed by improved FX liquidity and consumer demand. Overall, the trade balance increased by 76.0% y/y to USD4.74 billion (Q2-24: USD2.69 billion), given the faster increase in exports and the decline in imports. In the short term, we expect exports to sustain strong momentum, largely underpinned by higher volumes of natural gas and refined petroleum products. On the other hand, import growth should remain contained, as the continued decline in petroleum product imports—driven by expanding domestic refining capacity—offsets the impact of higher non-oil imports. Accordingly, we anticipate the trade surplus will expand further in 2025FY.
Capital Markets: Equities
The domestic bourse closed the week on a positive note, as buying interest in BUAFOODS (+6.7%), GUINNESS (+28.6%), DANGCEM (+1.0%), and NB (+8.1%) lifted the All-Share Index by 0.9% w/w to 141,854.48 points. Consequently, the month-to-date and year-to-date returns improved to +1.1% and +37.8%, respectively.
Trading activity, however, moderated as both volume and value declined by 38.1% w/w and 38.3% w/w, respectively. Sectoral performance was mixed with gains in the Consumer Goods (+5.5%), Oil & Gas (+2.8%), and Industrial Goods (+0.1%) indices, while the Insurance (-4.7%) and Banking (-2.6%) indices declined.
In the coming week, we expect the outcome of the MPC meeting to shape market activities, determining the magnitude of investors’ appetite for risk assets.
Money Market and Fixed Income
System liquidity remained in positive territory, opening the week with an estimated surplus of NGN2.11 trillion. This was further buoyed by inflows of NGN204.87 billion from OMO maturities. This ample liquidity kept the overnight rate stable at 27.0%. As a result, the system’s net long position increased to an average of NGN2.36 trillion (vs. NGN1.94 trillion in the prior week).
Barring any liquidity management measures by the CBN, we envisage further moderation in the OVN rate, underpinned by a persistently liquid financial system. For context, we expect further inflows from FGN bond coupon payments (NGN294.98 billion), OMO maturities (NGN254.90 billion) and NTB maturities (NGN201.34 billion) to bolster system liquidity, keeping interbank rates subdued in the near term.
Treasury Bills
The Treasury bills secondary market traded on a bullish note, supported by (1) ample system liquidity, (2) demand spillover from unmet bids at the PMA, and (3) the softer August 2025 CPI print, which strengthened expectations of a dovish tilt by the MPC at its upcoming September meeting.
Consequently, the average yield decreased by 158bps w/w to 20.2%. By segment, NTB and OMO yields declined by 30bps and 280bps to 18.5% and 22.0%, respectively. At Wednesday’s NTB auction, the DMO offered bills worth NGN290.00 billion – NGN30.00 billion for the 91D, NGN60.00 billion for the 182D, and NGN200.00 billion for the 364D bills.
Subscription level settled higher at NGN1.59 trillion (previous auction: NGN1.01 trillion), with a bid-to-offer ratio of 5.5x (previous auction: 2.1x). The auction closed with the DMO allotting NGN345.10 billion – NGN30.32 billion for the 91D, NGN42.28 billion for the 182D, and NGN272.50 billion for the 364D papers – at respective stop rates of 15.00% (previously: 15.32%), 15.30% (previously: 15.50%) and 16.78% (previously: 17.69%).
We expect the outcome of the MPC meeting scheduled for September 22 and 23 to be the dominant driver of sentiment in the T-bills secondary market. While robust system liquidity should continue to buoy demand, the Committee’s decision and tone on monetary easing will be critical in determining the extent of further yield compression.
Bonds
Similarly, the FGN bond secondary market traded on a bullish note, with average bond yield declining by 8bps to 16.6%. Across the benchmark curve, the average yield declined at the short (-17bps) and mid (-2bps) segments, driven by demand for the JAN-2026 (-82bps) and FEB-2031 (-12bps) bonds, respectively, while it closed flat at the long end.
Next week, we expect the outcome of the MPC meeting to be the key catalyst for yield movements in the bond secondary market, with policy guidance likely to set the tone for investor positioning.
Foreign Exchange
The naira appreciated this week by 2.2% w/w to NGN1,586.50/USD, supported by the robust USD150.00 million intervention by the CBN and sustained offshore inflows. Meanwhile, gross FX reserves increased for the eleventh consecutive week, growing by USD291.41 million w/w to USD41.95 billion (September 18). In the forwards market, the naira rates appreciated across the 1-month (+0.7% to NGN1,522.49/USD), 3-month (+0.7% to NGN1,575.50/USD), 6-month (+0.8% to NGN1,650.02/USD) and 1-year (+0.9% to NGN1,797.95/USD) contracts.
In the near term, we expect the naira to remain stable, underpinned by resilient FX market liquidity and improving domestic inflows. Prospective portfolio inflows are likely to benefit from the dovish shift in global monetary policy and the accompanying decline in treasury yields, which could enhance investor appetite for naira-denominated assets. At the same time, stronger non-oil export receipts and reduced incentives for speculative positioning should reinforce the positive momentum and suggest a more balanced FX market outlook.
Cordros
