Global Economy
According to the Bureau of Labour Statistics (BLS), US headline inflation rose for the second consecutive month to 3.0% y/y in September (August: 2.9% y/y), coming in below market expectations of 3.1%. The modest increase was primarily driven by higher energy prices amid the moderation in food and core inflation. Specifically, energy prices rose by 2.8% y/y (August: 0.2% y/y), reaching the highest level since May 2024 (3.7% y/y), primarily due to higher fuel oil and gasoline prices, amid slower price increases in utility gas service. On the other hand, food inflation fell by 10bps to 3.1% y/y (August: 3.2% y/y), reflecting lower costs of food away from home (3.7% y/y vs August: 3.9% y/y), while costs of food at home steadied at 2.7%. Similarly, core inflation (3.0% y/y vs August: 3.1% y/y) moderated, primarily due to lower transportation and medical services costs.
On a month-on-month basis, headline inflation rose slowly by 0.3% (August: +0.4% m/m). Although import tariffs have increased, their impact on consumer prices has been modest as many firms have absorbed higher costs by reducing hiring rather than raising prices significantly. Going forward, elevated tariffs may keep inflation slightly higher, but weaker consumer demand and a slow pass-through are expected to contain further price increases, with headline inflation likely stabilising near current levels. As a result, the softer-than-expected September CPI data and signs of labour market cooling are expected to prompt the US Federal Reserve to cut rates by 25 basis points next week, lowering the federal funds rate to 3.75 – 4.00%. This aligns with market expectations, with the CME FedWatch Tool pricing in a 98.3% probability of a rate cut at the October 29 meeting.
According to the Office for National Statistics (ONS), headline inflation in the UK remained unchanged at 3.8% y/y for the month of September, marking the third consecutive month of no change – settling below market expectations of 4.0% y/y. This was driven by the deceleration in food and core prices amid steady services inflation. Specifically, food inflation (+4.5% y/y vs August: +5.1% y/y) slowed for the first time in six months, reflecting lower prices for items such as vegetables, milk, and cheese. On the other hand, services inflation steadied at 4.7% y/y, as the uptick in transportation and vehicle maintenance costs was offset by a slower price growth in the communication, recreation and utilities sub-basket.
Core inflation, which excludes food and energy prices, also edged downwards to 3.5% y/y (August: +3.6% y/y), reflecting a gradual easing of underlying structural price pressures. On a month-on-month basis, consumer prices remained unchanged (August: +0.3% m/m), suggesting that the momentum of historic price increases is slowing. Looking ahead, inflation risks remain tilted to the upside, reflecting sticky services inflation underpinned by elevated transport costs, sustained wage pressures, and recent adjustments in administered prices, including higher sewerage tariffs, bus fares, vehicle excise duties, and the introduction of value-added tax on private school fees. Therefore, we believe the Bank of England (BoE) is likely to delay substantive easing until there is clearer evidence that inflation is returning to target.
Global Market
Global equities posted broad-based gains this week, buoyed by easing geopolitical concerns, encouraging macroeconomic data, and stronger-than-expected corporate earnings. In the US, major indices (DJIA: +1.2%; S&P 500: +1.1%) were on track to close higher, supported by renewed optimism around US-China relations following confirmation of a scheduled Trump–Xi meeting next Thursday. Sentiment was further reinforced by robust earnings reports from key corporates, including Procter & Gamble, General Electric, IBM, and Coca-Cola, all of which outperformed Wall Street expectations. European equities (STOXX Europe 600: +1.4%; FTSE 100: +2.4%), also advanced, lifted by solid corporate earnings, strength in energy stocks amid rising crude prices, and upbeat economic indicators such as the UK’s September retail sales data and a higher-than-expected Eurozone Composite PMI.
The positive momentum carried through to Asian markets, where major indices (SSE: +2.8%; Nikkei 225: +3.6%) gained on improved sentiment surrounding US-China trade talks, the PBoC’s policy rate decision, and increased investor appetite for technology and AI-related stocks. The latter was further fueled by newly appointed Japanese Prime Minister Sanae Takaichi’s pledge to increase targeted investment in AI and strategic industries. In Emerging and Frontier Markets, sentiment was similarly constructive, with the MSCI EM (+1.5%) and MSCI FM (+0.2%) indices advancing, driven largely by gains in China (+2.8%) and Romania (+2.6%), respectively.
Domestic Economy
Based on data obtained from the Nigerian Upstream Petroleum Regulatory Commission (NUPRC), Nigeria’s average crude oil production (including condensates) fell for the second consecutive month, declining by 4.7% m/m to 1.58 mb/d in September (August: 1.63 mb/d), marking the lowest level in 12 months. The decline in output was primarily attributed to the industrial action by the Petroleum and Natural Gas Senior Staff Association of Nigeria (PENGASSAN), which led to the temporary shutdown of several production and export facilities, as well as scheduled turnaround maintenance at key oil assets that curtailed output during the period. Oil production across major terminals recorded mixed outcomes.
Output declined at the Forcados (-16.4% m/m), Qua Iboe (-6.2% m/m), Tulja Okwuibome (-19.0% m/m), and Brass (-0.3% m/m) terminals, while moderate increases were recorded at the Bonny (+0.8% m/m), Escravos (+1.5% m/m), and Odudu (+8.6% m/m) terminals. Looking ahead, we expect crude output to recover following PENGASSAN’s suspension of the strike and the resumption of production and export operations. Moreover, rising oil investment and improved security conditions are expected to sustain higher crude oil output above the previous year’s level (2024FY: 1.55 mb/d). Nonetheless, we revise our 2025FY crude oil estimate downwards to 1.68 mb/d (Previous: 1.70 mb/d) to reflect recent output declines and production volatilities associated with maintenance and upgrades.
Federation Accounts Allocation Committee (FAAC) disbursements to the three tiers of government pared by 5.5% m/m to NGN2.10 trillion in October (September: NGN2.23 trillion), reflecting lower receipts from Company Income Tax (CIT), Customs External Tariff (CET) Levies, Oil & Gas Royalty and Excise duty, while revenue from Petroleum Profit Tax (PPT) Electronic Money Transfer Levy (EMTL), Value Added Tax (VAT) and Import Duty improved. The allocation represents 68.9% of October’s gross revenue (NGN3.05 trillion), with the balance directed to transfers, interventions, refunds (NGN835.00 billion) and collection costs (NGN116.15 billion).
By distribution, the FGN received NGN711.31 billion (September: NGN810.05 billion), States, NGN727.17 billion (September: NGN709.83 billion) and Local Governments NGN529.95 billion (September: NGN522.23 billion), while oil-producing states got an additional NGN134.96 billion (September: NGN120.76 billion) as derivation (13.0% of mineral revenue). In the near term, we expect potential revenue gains to stem from higher domestic oil production and relatively stronger CIT collections, driven by improved macroeconomic conditions. However, the recent naira appreciation and weaker oil prices may limit FX-related gains from oil receipts, tempering overall growth in FAAC inflows.
Capital Markets: Equities
Nigerian equities extended their bullish momentum, closing higher for the seventh consecutive week. The upbeat sentiment was driven by a strong start to the Q3 earnings season and heightened investor optimism ahead of additional results expected in the coming week. Notably, the All-Share Index (ASI) advanced by 4.5% w/w to 155,640.55 points, supported by gains in ARADEL (+25.2%), DANGCEM (+10.8%), MTNN (+8.6%), BUAFOODS (+6.5%), BUACEMENT (+12.5%), and WAPCO (+7.0%).
As a result, month-to-date and year-to-date returns settled higher at +9.1% and +51.2%, respectively. Activity levels strengthened, with trading volume and value rising by 52.3% w/w and 68.4% w/w, respectively, reflecting increased market participation. Sector performance was mixed as the Industrial Goods (+10.6%), Oil & Gas (+9.1%), and Consumer Goods (+3.9%) indices posted gains, while the Banking (-1.2%) and Insurance (-1.1%) indices declined.
Looking ahead, we expect the bullish momentum to persist into the coming week as investors digest a fresh wave of corporate earnings, with sentiment largely skewed toward positive surprises.
Money Market and Fixed Income
The OVN rate eased by 24bps to 24.8% following significant system inflows from FAAC disbursements (NGN1.50 trillion) and FGN bond coupon payments (NGN153.13 billion). Although the CBN absorbed NGN827.00 billion via an OMO auction to curb excess liquidity, overall system liquidity remained elevated, with average net long position rising to NGN2.05 trillion (previous: NGN1.88 trillion).
Barring any aggressive liquidity mop-ups by the CBN, we expect NGN259.69 billion in FGN bond coupon payments to bolster system liquidity, likely exerting downward pressure on the OVN rate.
Treasury Bills
The Treasury Bills secondary market traded mixed as the average yield across all instruments decreased by 2bps w/w to 19.4%. By segment, NTB yields increased by 5bps to 17.4%, while OMO yields pared by 2bps to 21.6%. At Wednesday’s NTB auction, the CBN offered bills worth NGN650.00 billion – NGN100.00 billion for the 91D, NGN100.00 billion for the 182D, and NGN450.00 billion for the 364D bills. Total subscription moderated to NGN750.91 billion (previous auction: NGN1.06 trillion), indicating a bid-to-offer ratio of 1.2x (previous auction: 1.9x).
The auction closed with the CBN allotting NGN391.59 billion – NGN7.61 billion for the 91D, NGN67.42 billion for the 182D, and NGN316.56 billion for the 364D papers – at respective stop rates of 15.30% (previous: 15.00%), 15.50% (previous: 15.25%) and 16.14% (previous: 15.77%). This indicates an under-allotment rate of 0.6x (previous: 1.0x). Additionally, the CBN conducted an OMO auction, offering NGN 600.00 billion worth of bills. Total subscriptions reached NGN1.11 trillion, representing a bid-to-offer ratio of 1.8x. Eventually, the CBN sold only NGN827.00 billion, with stop rates of 19.50% and 19.84% on the 196D and 252D maturities, respectively.
Looking ahead, system liquidity inflows in the coming week are expected to stimulate demand for bills, likely resulting in a further moderation in yields.
Bonds
The FGN bond secondary market was bullish as investors reinvested coupon inflows. Accordingly, the average yield declined by 10bps w/w to 15.9%. Across the curve, the average yield declined at the short (-9bps) and mid (-23bps) segments following demand for the APR-2029 (-53bps) and JUN-2033 (-67bps) bonds, respectively, while it closed flat at the long end.
Looking ahead, we expect trading direction in the secondary market to be shaped by the outcome of the FGN bond auction on Monday (27 October), where the DMO will re-open the AUG-2030 and JUN-2032 bonds, offering NGN130.00 billion apiece.
Foreign Exchange
The naira appreciated this week by 0.5% w/w to NGN1,466.00/USD, driven by increased supply. Meanwhile, gross FX reserves increased for the fifteenth consecutive week, growing by USD183.36 million w/w to USD42.87 billion (October 22). In the forwards market, the naira rates appreciated across the 1-month (+0.7% to NGN1,491.57/USD), 3-month (+0.7% to NGN1,541.95/USD), 6-month (+1.0% to NGN1,613.89/USD) and 1-year (+1.5% to NGN1,753.43/USD) contracts.
We maintain a positive outlook on the naira, supported by expectations of sustained FX liquidity. On the domestic front, rising non-oil exports and improving market confidence should underpin inflows, while externally, healthy FX reserves, a positive current account position, and a shift toward global monetary easing are expected to reinforce foreign investor sentiment and stimulate additional FX market inflows.
Cordros
