Global Economy
According to the Office for National Statistics (ONS), UK consumer prices rose to a 15-month high in April, rising by 90bps to 3.5% y/y (March: 2.6% y/y) – above market expectation (3.3% y/y). The increase was primarily attributed to a slower decline in energy costs (-0.9% y/y vs March: -8.0% y/y), following upward pressure on electricity and gas prices, in line with the government’s 6.4% increase in the energy price cap. In addition, services inflation (+5.4% y/y vs March: +4.7% y/y) accelerated, fueled by a substantial rise in airfare during the Easter period. Food inflation (+3.4% y/y vs March: 3.0% y/y) also increased amid renewed pressure on grocery prices.
On a month-on-month basis, consumer prices increased by 1.2% in April (March: +0.3% m/m), matching the largest monthly rise since April 2023 (+1.2% m/m). Looking ahead, we expect inflationary pressures to remain elevated in the near term, underpinned by high utility costs and potential wage growth. Given the stronger-than-expected inflation print and increasing upside risks, we anticipate that the Bank of England (BoE) will adopt a more cautious approach at their next policy meeting. Reflecting this shift in sentiment, financial markets have reassessed their expectations for monetary policy easing, with the probability of an August rate cut by the BoE dropping to 40.0% (Previously: 60.0%), reflecting concerns that persistent inflation may delay further monetary easing.
At its May 2025 monetary policy meeting, the People’s Bank of China (PBoC) voted to cut their benchmark lending rates by 10bps each, marking the first adjustment since October 2024 (-25bps a piece). Specifically, the one-year Loan Prime Rate (LPR) was reduced to 3.00% (previously: 3.10%), while the five-year LPR was lowered to 3.50% (previously: 3.60%). We believe the move reinforces a shift toward a more accommodative monetary stance as the bank responds to mounting economic headwinds.
The rate cut further reflects their broader policy push to counter persistent deflationary pressures, a deepening property market correction, and high youth unemployment. Additionally, the PBoC injected c.USD69.54 billion into the banking system via a one-year Medium-Term Lending Facility (MLF) operation, aimed at maintaining ample liquidity to support credit growth.
The central bank also directed major state-owned lenders to lower deposit rate ceilings by 30–40bps, helping to preserve banks’ interest margins while discouraging excessive household savings and encouraging consumer spending. The PBoC’s policy tone suggests a strong willingness to deploy further monetary and fiscal tools as necessary, with an “appropriately loose” policy stance intended to bolster domestic consumption, stabilize foreign trade, and ensure macroeconomic stability. Accordingly, we expect additional interest rate cuts and targeted fiscal interventions, particularly in the housing and consumer sectors, in the near term, to help reinforce recovery momentum.
Global Equities
Risk-off sentiment returned to the global equities market this week, as investors grappled with persistent uncertainty over trade negotiations, heightened concerns about the U.S. fiscal outlook, and mixed signals from economic data and corporate earnings. At the time of writing, US equities (DJIA: -2.5%; S&P 500: -2.9%) were on track for their worst weekly performance since April 18, pressured by fears that a new fiscal bill featuring tax cuts with increased defense spending could exacerbate the federal deficit. Market sentiment was further dented by renewed trade tensions after President Trump threatened a 50.0% tariff on European Union goods starting June 1 and a 25.0% tariff on any iPhones manufactured outside the US.
Similarly, European equities (STOXX Europe 600: -0.8%; FTSE 100: +0.3%) dropped lower late in the week, as early optimism from strong earnings was overshadowed by growing global trade risks. Elsewhere, Asian equities (Nikkei 225: -1.6%; SSE: -0.6%) declined, pressured by mounting concerns over the US fiscal outlook and the slowest pace of growth in Japan’s exports in recent quarters, as rising tariffs begin to take a toll on demand. Lastly, the Emerging Markets index (MSCI EM: -0.6%) edged lower, reflecting losses in China (-0.6%), while the Frontier Markets index (MSCI FM: +1.9%) advanced, supported by strong performances in Vietnam (+0.9%) and Romania (+5.0%).
Nigeria: Domestic Economy
At the May meeting, the Monetary Policy Committee (MPC) of the Central Bank of Nigeria (CBN) unanimously voted to hold the Monetary Policy Rate (MPR) at 27.50% (Previous: 27.50%), for the second consecutive period this year. The Committee’s decision to hold rates was primarily driven by the need to anchor inflation expectations and ease the pressure on the naira amid the increased global uncertainty. At the same time, the Committee retained all other parameters – Cash Reserve Requirement (CRR) for Deposit Money Banks (DMBs) and Merchant Banks at 50.0% and 16.0%, respectively; the asymmetric corridor around the MPR at +500bps/-100bps and the liquidity ratio at 30.0%.
Looking ahead, we expect future decisions by the MPC to be driven primarily by movements in the foreign exchange market, the trajectory of inflation, and broader macroeconomic conditions. Should inflation data continue to exhibit irregular swings and global headwinds such as trade restrictions and tariffs persist, the Committee may opt to maintain its current policy stance until more definitive economic signals emerge.
The Purchasing Manager’s Index (PMI) printed above the 50-point threshold for the fifth straight month, indicating sustained expansion of business activities in the Nigerian economy. According to CBN data, the composite PMI moderated to 52.2 points in April (March: 52.3 points), driven by a slowdown in the agriculture sector. Specifically, the Industry PMI (51.8 points vs March: 51.5 points) expanded due to improved activities in the Transportation Equipment, Petroleum & Coal Products and Printing & Related Supports subsectors.
The Services sector PMI (51.8 points vs March: 51.5 points) expanded, reflecting resilient activities across the Management of Companies, Educational Services and Finance & Insurance sub-sectors. Elsewhere, the Agriculture sector PMI (53.8 points vs March: 54.7 points) pared, reflecting a slowdown in general farming activities and inventories, partly due to the onset of the planting season. Looking ahead, we anticipate a sustained expansion of private sector activities, supported by improving macroeconomic conditions such as naira stability and easing inflationary pressures. However, persistently tight financial conditions may present a downside risk to overall economic activity in the near term.
Capital Markets: Equities
Sentiment in the Nigerian equities market turned negative this week, buoyed by investors’ reaction to the Central Bank of Nigeria’s decision to maintain the Monetary Policy Rate at 27.5%, alongside profit-taking in recent outperformers and a shift in capital flows toward the fixed income market. As a result, the All-Share Index declined by 0.6% w/w to 109,028.62 points, driven by losses in TRANSCOHOT (-15.0%), MTNN (-2.9%), TRANSCORP (-4.4%), ACCESSCORP (-8.1%) and FIDELITYBK (-10.3%).
Consequently, month-to-date and year-to-date returns moderated to +3.1% and +5.9%, respectively. Despite the bearish tone, trading volume and value increased by 43.2% and 11.0% w/w, respectively. Meanwhile, sectoral performance was mixed, as the Oil & Gas (-3.4%) and Banking (-1.5%) indices declined, while the Consumer Goods (+2.2%), Insurance (+0.7%), and Industrial Goods (+0.7%) indices advanced.
Looking ahead, we expect cautious trading to persist amid a lack of clear positive catalysts, with profit-taking in recent gainers offset by bargain hunting in beaten-down names. In the medium term, we expect sentiment to be shaped by macroeconomic trends and movement in fixed income yields.
Money market and fixed income
The overnight (OVN) rate declined by 4bps w/w to 26.9%, as inflows from OMO maturities (NGN1.14 trillion) and FGN bond coupon payments (NGN17.87 billion) offset debits for the OMO PMA (NGN655.25 billion) and net NTB issuance (NGN115.80 billion). Accordingly, the average system liquidity improved, settling at a net long position of NGN646.50 billion (vs a net long position of NGN230.04 billion in the previous week).
Next week, barring any mop-up activity by the CBN, we expect inflows from OMO maturities (NGN987.22 billion) and FGN bond coupon payments (NGN5.63 billion) to offset expected debits for the FGN bond PMA (NGN300.00 billion), thus bolstering system liquidity. As a result, we expect the OVN rate to taper from current levels.
Treasury bills
The Treasury bills secondary market traded with bullish sentiments, underpinned by the (1) liquidity influx, and (2) market participants looking to fill unmet bids from the PMAs this week. Consequently, the average yield across all instruments declined by 31bps to 23.4%. Across the market segments, the average yield declined by 5bps and 38bps to 20.8% and 26.5% in the NTB and OMO segments, respectively.
At Wednesday’s NTB auction, the CBN offered bills worth NGN500.00 billion – NGN50.00 billion for the 91D, NGN100.00 billion for the 182D, and NGN350.00 billion for the 364D bills. Total subscription levels settled higher at NGN1.17 trillion (previous auction: NGN1.09 trillion), indicating a bid-to-offer ratio of 2.3x (previous auction: 2.0x). The auction closed with the CBN over-allotting to the tune of NGN615.80 billion – NGN71.67 billion for the 91D, NGN41.13 billion for the 182D, and NGN503.00 billion for the 364D papers – at respective stop rates of 18.00% (unchanged), 18.50% (unchanged) and 19.56% (previous: 19.63%). The CBN also conducted an OMO auction on Tuesday (20 May), offering instruments worth NGN500.00 billion – NGN250.00 billion for the 182D and NGN250.00 billion for the 210D. Total subscription settled at NGN743.25 billion (bid-to-offer: 1.5x), with the CBN allotting NGN655.25 billion – NGN117.50 billion for the 182D and NGN537.75 billion for the 210D at respective stop rates of 23.77% and 23.98%.
Looking ahead, we expect the liquidity surplus to continue to drive the demand for bills, causing yields to decline further in the Treasury bills secondary market, albeit slightly.
Bonds
The FGN bond secondary market was quiet, as market participants largely anticipated the MPC’s decision to hold the policy rate. As a result, the average yield pared by 3bps to 19.0%. Across the benchmark curve, the average yield decreased at the short (-9bps) and mid (-1bp) segments, driven by demand for the JAN-2026 (-32bps) FEB-2031 (-5bps) bonds respectively, while it increased at the long (+1bp) end following selloffs of the APR-2037 (+3bps) bond.
In the coming week, we believe the outcome of this month’s FGN bond auction on Monday (26 May) will shape the direction of yields in the secondary market. At the auction, the DMO is set to offer instruments worth NGN300.00 billion through re-openings of the APR-2029 and MAY-2033 bonds. 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 NGN1,585.00/USD, mostly supported by the CBN’s sale of c.USD190.40 million to the market. Meanwhile, gross FX reserves increased for the fourth consecutive week, growing by USD166.63 million w/w to USD38.54 billion (21 May). In the forwards market, the naira rates appreciated across the 1-month (+1.1% to NGN1,623.11/USD), 3-month (+1.5% to NGN1,682.77/USD), 6-month (+1.6% to NGN1,770.17/USD) and 1-year (+2.6% to NGN1,938.74/USD) contracts.
The naira is likely to stay stable in the short term, as global pressure remains contained amid easing trade tensions. However, any substantial appreciation appears unlikely, with FX liquidity still constrained by subdued foreign portfolio inflows amid persistent global uncertainty.
Cordros
