Global Economy
According to the Office for National Statistics (ONS), headline inflation in the UK rose by 20bps to 3.8% y/y in July (June: +3.6% y/y) – slightly above market expectations (3.7% y/y). The upturn was primarily driven by higher transport costs and renewed strength in services inflation.
Specifically, transport prices (+3.2% y/y vs June: +1.7% y/y) climbed on the back of elevated airfares, reflecting the timing of school summer holidays, alongside rising petrol, hotel, and restaurant charges. Services inflation (+5.0% y/y vs June: +4.7% y/y) also rose to a three-month high, highlighting persistent domestic price pressures. Similarly, food inflation (+4.9% y/y vs June: +4.5% y/y) increased, reflecting higher prices for items such as coffee, chocolate, and beef.
Core inflation edged slightly higher to 3.8% y/y (June: +3.7% y/y), as transport- and food-led pressures offset easing in housing and recreation. On a month-on-month basis, consumer prices slowed to 0.1% in July (June: +0.3% m/m), suggesting that while underlying inflationary pressures remain, the short-term momentum in price growth is slowing.
The July inflation outcome reinforces the Bank of England’s policy dilemma, as the path back to the 2.0% target remains uneven. While the moderation in monthly price growth suggests some easing in headline momentum, the renewed strength in services inflation underscores persistent domestic cost pressures. This stickiness reduces the scope for aggressive monetary easing, leaving policymakers inclined to adopt a more measured pace of rate cuts in the near term. In line with this, markets now anticipate the Bank of England to delay further rate cuts until March 2026.
Flash estimates from S&P Global show that the United States (US) Composite PMI rose to a seven-month high of 55.4 points in August (July: 55.1 points), as strong factory output growth offset a softer service(s) momentum. Specifically, the Manufacturing PMI rebounded sharply to 53.3 points (July: 49.8 points) — the highest since May 2022 (57.0 points) — reflecting robust production and a pickup in new orders from both domestic and external demand.
In contrast, the services PMI moderated to 55.4 points (July: 55.7 points) as weaker services exports, particularly in tourism, weighed on activity, even as new business inflows strengthened. Labour market conditions remained resilient, with job creation accelerating to the fastest level in three months, supported by rising backlogs. However, cost pressures intensified, as firms reported higher input costs linked to tariffs, resulting in the steepest rise in output prices since 2022.
Looking ahead, US private sector activity is expected to remain expansionary, underpinned by resilient demand and solid labour market conditions. Still, elevated cost pressures, tariff-driven input inflation, and lingering policy uncertainty may weigh on business sentiment and temper momentum, while persistent inflation risks are likely to keep the Fed on a slower, more cautious path of rate cuts.
Global Markets
Global equities took a breather after a strong rally, as firmer US economic data and a hawkish tilt in Federal Reserve rhetoric tempered expectations for imminent rate cuts. Investor sentiment turned cautious ahead of the Fed Chair’s Jackson Hole address, prompting a recalibration of rate outlooks. As of the time of writing, US equities (DJIA: -0.4%; S&P 500: -1.2%) were set for a weekly loss, weighed down by selloffs in tech stocks like Nvidia and Palantir, earlier in the week. By contrast, European markets (STOXX Europe 600: +0.5%; FTSE 100: +1.7%) gained on upbeat business activity data, progress in EU-US trade discussions, and optimism surrounding diplomatic overtures on Ukraine-Russia peace talks.
In Asia, Japanese equities (Nikkei 225: -1.7%) slipped amid technology sector weakness, while Chinese stocks (SSE Composite: +3.5%) rallied on renewed optimism over US-China trade talks and speculation that Nvidia may halt production of its H20 chip in China, a potential boon for domestic competitors. Meanwhile, the MSCI EM (-0.8%) and MSCI FM (-0.3%) indices closed lower, dragged by sharp losses in Taiwan (-2.3%) and Romania (-1.3%), respectively.
Nigeria: Domestic Economy
According to the National Communications Commission (NCC), the total number of active telephony subscribers declined by 0.5% m/m to 171.73 million in June (May: 172.67 million), reflecting adjustments for reporting discrepancies by a major operator. Internet subscriptions also contracted by 0.3% m/m to 141.17 million (May: 141.57 million). On a year-on-year basis, the average telephony subscribers decreased by 21.9% to 166.51 million (2024FY average: 181.76 million), while the average number of internet subscribers fell by 12.5% to 138.20 million (2024FY average: 144.81 million.
The declines are largely attributable to the enforcement of SIM-NIN linkage requirements. In terms of market structure, MTN Nigeria retained its dominant position with a 52.0% share (89.24 million subscribers), followed by Airtel Nigeria at 34.4% (58.97 million), while Globacom and 9mobile accounted for 12.2% (20.89 million) and 1.4% (2.44 million), respectively. Looking ahead, we expect a gradual recovery in the subscriber base, supported by SIM reactivation initiatives and regulatory easing. We believe, MTN Nigeria and Airtel Nigeria are best positioned to lead the rebound, leveraging their strong market presence and wider distribution networks.
Nigeria’s crude oil output remained above its OPEC+ quota of 1.50 mb/d for the second consecutive month, averaging 1.50 mb/d in July (June: 1.50 mb/d), according to OPEC’s August Monthly Oil Market Report (MOMR). This modest outperformance reflects the combined impact of improved security conditions in the Niger Delta and a gradual rebound in upstream investment, supported by the transfer of divested assets from international oil companies to indigenous operators.
Indigenous players have increasingly taken the lead in deploying capital and accelerating field development, which has helped sustain production levels despite lingering operational and infrastructural challenges. Notably, average crude production in H1-25 stood at 1.47 mb/d, underscoring the sector’s gradual but fragile recovery momentum. Overall, we expect Nigeria’s crude oil production to remain marginally above the OPEC+ quota through year-end, underpinned by improved security measures and a gradual recovery in sector investments. However, lingering vulnerabilities around pipeline security and operational bottlenecks remain key downside risks that could cap the sustainability of recent gains.
Capital Markets: Equities
Bearish sentiments intensified this week as profit-taking activities dominated three of the five trading sessions. Particularly, sell pressures on DANGCEM (-9.9%), BUACEMENT (-10.0%), STANBIC (-15.4%), MTNN (-2.3%) and GTCO (-3.8%) dragged the NGX All Share Index lower by 2.5% w/w, moderating the MTD and YTD returns to +0.8% and +37.0%, respectively. Market activity also softened, with trading volume declining by 44.3% w/w while trading value rose by 7.5% w/w. Sector performance mirrored the market’s broad gauge, following losses in the Industrial Goods (-8.4%), Insurance (-4.2%), Banking (-3.5%) and Oil & Gas (-0.8%) indices. However, the Consumer Goods (+0.8%) index closed higher.
In the near term, we expect profit-taking to persist, 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 declined by 325bps w/w to 29.2%, bolstered by inflows from OMO maturities (NGN854.46 billion) despite the increased uptakes at the CBN’s Standing Lending Facility (SLF) window (weekly average: NGN360.19 billion vs NGN294.80 billion in the prior week). Accordingly, the average system liquidity improved, settling at a net long position of NGN159.40 billion (vs a net long position of NGN62.94 billion in the previous week).
In the absence of liquidity management measures by CBN, we expect the inflows from FGN bond coupon payments (NGN113.62 billion) and OMO maturities (NGN758.00 billion) to support system liquidity, weighing on the OVN rate.
Treasury Bills
Proceedings in the Treasury bills secondary market were bearish as the average yield across all instruments advanced by 59bps to 22.0%. Across the market segments, the average yield expanded by 42bps to 18.4% and 98bps to 25.5% in the NTB and OMO segments, respectively. At Wednesday’s NTB auction, the DMO offered bills worth NGN230.00 billion – NGN50.00 billion for the 91D, NGN30.00 billion for the 182D, and NGN150.00 billion for the 364D bills.
Total subscription levels settled higher at NGN396.42 billion (previous auction: NGN366.55 billion), indicating a bid-to-offer ratio of 1.3x (previous auction: 1.1x). The auction closed with the DMO over-allotting to the tune of NGN303.69 billion – NGN7.70 billion for the 91D, NGN27.70 billion for the 182D, and NGN268.28 billion for the 364D papers – at respective stop rates of 15.35% (previous:15.00%), 15.50% (unchanged) and 17.44% (previous: 16.50%).
Meanwhile, the OMO PMA saw even stronger demand. The CBN offered NGN600.00 billion across 89D and 124D bills but recorded robust subscriptions of NGN1.02 trillion (bid-to-offer ratio: 1.7x). The apex bank allotted NGN897.20 billion, exceeding the offer amount, with stop rates printing steeply higher at 25.50% (89D) and 25.99% (124D), underscoring efforts to aggressively sterilise excess liquidity.
Looking ahead, we anticipate that the expected system liquidity will drive demand for bills, resulting in a tapering of yields in the secondary market.
Bonds
The FGN bond secondary market closed the week on a bearish note as investors reacted to the higher-than-expected stop rate at the NTB auction. Consequently, the average yield expanded by 8bps to 16.7%. Across the benchmark curve, the average yield increased at the short (+2bps), mid (+11bps) and long (+5bps) segments, driven by selloffs of the APR-2029 (+42bps), FEB-2031 (+24bps) and JUN-2038 (+38bps) bonds, respectively.
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 appreciated by 1.1% w/w to NGN1,520.00/USD, supported by (1) the CBN’s intervention of c. USD50.00 million during the week, and (2) increased inflows from FPIs following the OMO auction. Meanwhile, gross FX reserves increased to the highest level since Dec 2021, growing by USD353.47 million w/w to USD41.08 billion (21 August). In the forwards market, naira rates depreciated across the 1-month (-2bps to NGN1,577.40/USD), 3-month (-0.1% to NGN1,653.75/USD), 6-month (-1bp to NGN1,763.94/USD) and 1-year (-1bp to NGN1,975.62/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
