Global Economy
According to the Bureau of Labour Statistics (BLS), US headline inflation eased to +2.7% y/y in November—its slowest pace since July—from +3.0% y/y in September, undershooting market expectations of 3.1%. The moderation was primarily driven by softer food inflation, which more than offset the increase in energy costs. Specifically, food inflation fell by 50bps to +2.6% y/y (September: +3.1% y/y), reflecting a notable slowdown in prices of food at home (1.9% y/y vs September: 2.7% y/y), while costs of food away from home steadied at 3.7%. Similarly, core inflation (2.6% y/y vs September: 3.0% y/y) fell to its lowest reading since March 2021, supported by lower apparel and new vehicle prices. In contrast, energy inflation accelerated to +4.2% y/y (September: +2.8% y/y) on the back of higher fuel oil, gasoline, and natural gas prices.
Due to the 43-day government shutdown, the BLS did not collect data for October. Consequently, headline inflation over the two months to November increased modestly by 0.2% (September: +0.3% m/m). Looking ahead, the November CPI print suggests that underlying price pressures—particularly in food and core categories—are gradually easing. However, the US inflation trajectory remains uncertain, compounded by the absence of October data, which limits clarity on near-term momentum. We believe the high energy prices and persistent import tariffs are likely to keep inflationary pressures elevated, constraining the potential for a sustained disinflation. Against this backdrop, we expect the US Federal Reserve to keep rates unchanged at its next meeting while awaiting clearer evidence of a sustained moderation in inflation.
According to the Bureau of Labour Statistics, total non-farm payroll employment in the US increased by 64,000 in November – exceeding market expectations of +50,000, after a decline of 105,000 in October. This increase was primarily driven by higher employment in healthcare (+46,000), with growth concentrated in ambulatory healthcare services, hospitals, nursing and residential care facilities, coupled with gains in construction (+28,000). Employment in social assistance (+18,000) also remained resilient, supported by continued hiring in individual and family services. Conversely, employment edged down in transportation and warehousing (-18,000) due to loss in loss in couriers and messengers.
In addition, federal government employment continued its downward trend, declining by an additional 6,000 jobs (October: -162,000), reflecting federal workforce reductions following deferred buyouts under the current administration’s downsizing efforts. Despite the headline job gains, the broad-based unemployment rate rose to its highest level in four years at 4.6% m/m (October: 4.4% m/m), while the labour force participation rate inched slightly higher to 62.5% m/m (October: 62.4% m/m). Looking ahead, we expect job growth to remain modest as labour-market momentum continues to soften. Employment gains remain mainly concentrated in healthcare and other service-oriented sectors, while cyclical industries are showing limited progress, suggesting that the underlying strength of the labour market is weakening. This uneven pattern suggests a slower pace of job creation in the months ahead, particularly as businesses navigate ongoing policy shifts and trade-related headwinds.
Global Market
Global equity markets traded on a mixed note this week as investors assessed a dense flow of economic data and policy decisions across major economies. At the time of writing, US equities (DJIA: -1.0%; S&P 500: -0.8%) were on track to close the week lower, weighed by a mixed macro backdrop. Investor sentiment was shaped by stronger-than-expected November employment data, weaker-than-expected October retail sales, December PMI flash estimates, and a softer-than-anticipated November inflation print.
However, European equities (STOXX 600: +1.2%; FTSE 100: +2.0%) ended the week higher, supported by a combination of easing inflation and unemployment data in the UK, improving economic sentiment in Germany, and largely anticipated policy decisions from the ECB and BoE. In Asia, performance was mixed as Chinese equities (SSE: +0.1%) edged marginally higher despite weaker-than-expected retail sales and industrial production data, while Japanese equities (Nikkei 225: -2.6%) declined, tracking an AI-led sell-off on Wall Street and facing additional pressure from the BoJ’s rate hike decision amid persistent inflationary pressures. Meanwhile, the MSCI Emerging Markets (-2.3%) Index declined, driven largely by losses in India (-0.4%) and Taiwan (-1.8%), while the MSCI Frontier Markets (+0.7%) index closed higher, supported by strong gains in Vietnam (+3.9%).
Domestic Economy
According to the National Bureau of Statistics (NBS), consumer prices moderated for the eighth consecutive month, easing by 160bps to 14.45% y/y in November (October: 16.05% y/y). The moderation reflects continued deceleration in food and core inflation. Precisely, food inflation fell by 204bps to 11.08% y/y (October: 13.12% y/y), supported by relatively improved crop harvests, fewer flood-related disruptions to food supply, naira appreciation, and moderate increases in logistics costs. Similarly, core inflation (all items less farm produce and energy) moderated by 65bps to 18.04% y/y (October:18.69% y/y), underpinned by naira stability and lower energy costs.
Conversely, on a month-on-month basis, headline inflation rose by 29bps to 1.22% (October: 0.93% m/m) primarily due to increased consumer demand associated with preemptive buying and stockpiling ahead of the December festive period. Looking ahead, monthly price pressures are likely to remain elevated in December, driven by strong festive-season demand. However, these pressures should be more contained than in 2024, supported by improved food supply conditions, a more stable exchange rate, and softer energy cost pressures. Even so, a higher December 2025 inflation reading remains possible, primarily due to CPI rebasing effects. Overall, we project headline inflation to average 21.9% y/y in 2025E.
Federation Accounts Allocation Committee (FAAC) disbursements to the three tiers of government dropped by 7.9% m/m to NGN1.93 trillion in December (November: NGN2.09 trillion), reflecting lower receipts from Petroleum Profit Tax (PPT), Hydrocarbon Tax (HT), Companies Income Tax (CIT), Capital Gain Tax (CGT) and Stamp Duties Tax (SDT), Oil & Gas Royalties, Import Duty, Common External Tariffs (CET) Levies, Value Added Tax (VAT), Electronic Money Transfer Levy (EMTL) and Fees.
The allocation accounts for 82.3% of total gross revenue (NGN2.34 trillion), with the balance directed to transfers, interventions, and refunds (NGN330.63 billion) and collection costs (NGN84.25 billion). By distribution, the FGN received NGN747.16 billion (November: NGN758.41 billion), States, NGN601.73 billion (November: NGN689.12 billion) and Local Governments NGN445.27 billion (November: NGN505.80 billion), while oil-producing states got an additional NGN134.35 billion (November: NGN141.40 billion) as derivation (13.0% of mineral revenue). Looking ahead, we anticipate that enhanced tax collection mechanisms and improved corporate profitability will support FAAC inflows. However, lower oil prices and naira appreciation could weigh on revenues from oil-related sources, despite gradual gains in crude oil production. As a result, overall growth in FAAC inflows is expected to remain moderate in the near term.
Capital Markets: Equities
The Nigerian equities market extended its bullish momentum for a third consecutive week, supported by gains in BUAFOODS (+6.0%), FIRSTHOLDCO (+42.9%), BUACEMENT (+4.9%), GUINNESS (+33.0%), and NESTLE (+10.0%). Consequently, the All-Share Index advanced by 1.8% w/w to close at 152,057.38 points, lifting the month-to-date and year-to-date returns to +5.9% and +47.7%, respectively.
Market activity strengthened during the week, with trading volume and value rising by 125.2% w/w and 212.6% w/w, respectively. Meanwhile, sector performance was broadly positive as the Consumer Goods (+6.1%), Insurance (+3.1%), Banking (+2.2%), and Industrial Goods (+0.7%) indices recorded gains, while the Oil & Gas (-0.2%) index closed lower.
Looking ahead, with the coming week shortened by the holiday, market activity is expected to be quieter and choppy, with flows driven by year-end portfolio rebalancing.
Money Market and Fixed Income
The OVN rate expanded by 8bps to 22.8% as debits for the FGN Bond PMA (NGN596.47 billion) outweighed inflows of NGN 537.75 billion from OMO maturities. As a result, average system liquidity tapered, closing at a net long position of NGN2.92 trillion (prior week: NGN3.28 trillion).
Barring any liquidity management measures, we expect inflows from OMO maturities (NGN400.00 billion), NTB maturities (NGN281.53 billion) and FGN Bond coupon payments (NGN216.76 billion) to boost system liquidity, thereby causing the OVN rate to pare.
Treasury Bills
The Treasury bills market closed the week on a bearish footing as investors sold off positions to participate at the NTB PMA. Consequently, the average yield across all instruments increased by 7bps to 19.8%. Across segments, average NTB yields increased by 3bps to 17.8%, while average OMO yields rose by 19bps to 22.0%. At Wednesday’s NTB PMA, the DMO offered NGN700.00 billion in bills, with total subscriptions reaching NGN1.51 trillion (bid-to-offer: 2.2x).
Eventually, the DMO sold NGN704.07 billion (bid-to-cover: 2.1x), increasing stop rates on the 91-Day to 15.50% (Previous: 15.30%) and the 182-Day to 15.95% (Previous: 15.50%), while the stop rate on the 364-Day bill declined to 17.51% (Previous: 17.95%).
With system liquidity expected to improve next week, we anticipate stronger demand for T-bills, which should drive yields lower.
Bonds
The FGN bond secondary market traded on a bearish footing, pressured by the sharp uptick in marginal rates at Monday’s primary auction and continued year-end portfolio optimisation. Consequently, the average yield increased by 7bps at 16.7%. Across the curve, the average yield increased at the short (+26bps) end following selloffs of the JAN-2026 (+234bps) bond, while it declined at the long (-1bp) end driven by demand for the JUNN-2053 (-5bp) bond.
Meanwhile, the average yield closed flat at the mid segment. At the auction, the DMO reopened the AUG-2030 and JUN-2032 bonds, offering a total of NGN460.00 billion. Total demand settled at NGN890.61 billion (bid-to-offer: 1.9x), with the DMO eventually allotting NGN596.47 billion (bid-to-cover: 1.3x). Stop rates cleared higher at 17.20% for AUG-2030 and 17.30% for JUN-2032, compared with 15.90% and 16.00% at the previous auction.
Next week, we expect bond yields to ease as investors take advantage of the elevated yield environment, with improved system liquidity also likely to bolster demand for bonds.
Foreign Exchange
The naira depreciated this week by 0.9% w/w to NGN1,443.00/USD, as demand from local corporates ahead of the holiday season outweighed the supply from the CBN (USD150.00 million). Meanwhile, after twenty five (25) consecutive weeks of accretion, the gross FX reserves declined this week by USD230.74 million w/w to USD45.21 billion (December 17). In the forwards market, the naira rates depreciated across the 1-month (-0.5% to NGN1,492.73/USD), 3-month (-0.2% to NGN1,540.04/USD) and 6-month (-0.2% to NGN1,602.20/USD) contracts, while it appreciated marginally on the 1-year (+1bp to NGN1,726.67/USD) contracts.
FX demand from local corporates may remain elevated this month, driven by imports to meet festive season consumer demand and possible stockpiling of inputs for first quarter production. Nevertheless, the naira is anticipated to remain broadly stable, supported by the CBN’s measured interventions to manage excess volatility and continued inflows from foreign portfolio investors.
