Global Economy
Based on the recently released data from S&P Global, the United States (US) Composite PMI fell for the second consecutive month to 53.60 in September (August: 54.60), reflecting slower momentum across both manufacturing and services.
Specifically, the Manufacturing PMI pared to 52.00 points (August: 53.00 points), reflecting the impact of increased export losses linked to tariff measures, while the Services PMI moderated to 53.90 points (August: 54.50 points) amid subdued domestic orders that offset a modest rebound in external demand. Labour market conditions softened as job creation cooled from its recent three-month high, even as backlogs of work continued to rise for the sixth consecutive month.
At the same time, cost pressures intensified, with higher tariff-driven input costs pushing output prices to the steepest increase since 2022. Taken together, the data suggest a moderation in U.S. growth momentum alongside sticky inflationary pressures, presenting a nuanced backdrop for Fed policy expectations and financial market positioning. Looking ahead, US private sector activity is expected to stay on an expansionary path, supported by resilient domestic demand and a more accommodative interest rate environment.
That said, elevated cost pressures — driven by tariff-induced input inflation — together with policy uncertainty, could weigh on business sentiment and temper the pace of growth.
According to recently released data from S&P Global, UK Composite PMI moderated sharply to 51.00 in September (August: 53.50), underscoring a notable slowdown in private sector activity and pointing to weakening growth momentum. The slowdown was primarily driven by the Services sector, where the PMI eased to 51.90 in September from a 16-month high of 54.20 in August, as softer domestic demand and elevated geopolitical uncertainty weighed on activities.
Manufacturing performance also weakened, with the index falling to 46.20 in September from 47.00 in August, reflecting weak domestic and export orders, subdued investment appetite, and fragile business confidence. In addition, tariff-related pressures — particularly from US trade measures — exacerbated the strain, underscoring a private sector grappling with both cyclical weakness and structural challenges.
In the near term, UK private sector momentum is likely to remain muted, constrained by weak external demand, the drag from higher US tariffs, elevated borrowing costs, and subdued household spending. Persistent policy uncertainty and tight financial conditions could further weigh on investment appetite, while the ongoing disinflation trend provides only a modest relief. Overall, meaningful economic momentum is unlikely to materialise until external headwinds soften and domestic confidence begins to recover.
Global Market
Global equities ended the week on a mixed note as investors balanced cautious commentary from the US Fed, profit-taking in AI-linked stocks, and weaker PMI prints across Europe. Sentiment was further dampened by the announcement of new US tariffs on furniture, heavy trucks, and pharmaceuticals, coupled with the OECD projections of slowing global growth to 3.2% in 2025 from 3.3% in 2024. At the time of writing, US equities (DJIA: -0.4%; S&P 500: -0.4%) were set to close the week lower, driven by rotation out of AI leaders and profit-taking near record highs.
Investor sentiment was also pressured by US Fed Chair Powell’s warning on stretched equity valuations and persistent inflation risks, while the upward revision to Q2-25 GDP tempered expectations for deeper rate cuts, reinforcing a more cautious risk tone. Similarly, European equities (STOXX Europe 600: -0.6%; FTSE 100: -0.1%) were on track to close lower, pressured by weaker-than-expected UK PMI data and a contraction in eurozone manufacturing activity.
In contrast, Asian markets were the bright spot for the week (Nikkei 225: +0.7%; SSE: +0.2%), buoyed by the PBoC’s policy support pledge, easing US–China trade tensions, and strong gains in Japanese tech names. Meanwhile, the Emerging and Frontier Markets (MSCI EM: -0.1%; MSCI FM: -0.7%) retreated, weighed by losses in India (-2.1%) and Morocco (-1.9%), respectively.
Domestic Economy
According to the Nigerian Bureau of Statistics (NBS), the Nigerian economy grew by 4.23% y/y in Q2-25 (Q1-25: 3.13% y/y), maintaining its growth momentum. Parsing through the breakdown, the oil sector recorded a double-digit growth, expanding by 20.46% y/y, and surpassing the modest growth recorded in the previous quarter (Q1-25: 1.87% y/y). This outturn was supported by higher crude oil output (Q2-25: 1.68 mb/d vs. Q2-24: 1.41 mb/d | Q1-25:1.62 mb/d), which we attribute to the significant reduction in oil theft and pipeline vandalism, which is underpinned by the government’s enhanced security interventions through increased surveillance, as well as improved oil investment.
At the same time, the non-oil sector maintained its resilience, after expanding by 3.64% y/y (Q1-25: 3.19% y/y) reflecting stronger growth in the agriculture sector (+2.80% y/y vs Q1-25: +0.07% y/y), while the manufacturing (+1.60% y/y vs Q1-25: +1.69% y/y) and the services (+3.94% y/y vs Q1-25: +4.33% y/y) sub-sectors also recorded expansions.
We expect Nigeria’s economy to maintain a positive growth trajectory in the short to medium term. Specifically, the oil sector should benefit from sustained security measures. However, ageing infrastructure, which is characterised by frequent leaks and operational inefficiencies, will continue to constrain stronger output growth (Q3-25E: 1.67 mb/d; 2025E: 1.70 mb/d). At the same time, we expect the growth of the non-oil sector to slow from the previous quarter (+3.24% y/y vs Q2-25: 3.64% y/y), reflecting the impact of seasonal patterns such as the lean season, subdued consumer demand driven by weak disposable income, and still tight financial conditions. Overall, we expect real GDP growth to settle at 3.60% y/y in Q3-25, with full-year 2025 growth at 3.65% y/y (2024FY: +3.34% y/y).
At the September meeting, the Monetary Policy Committee (MPC) of the Central Bank of Nigeria (CBN) reduced the Monetary Policy Rate (MPR) by 50bps to 27.0% (Previous: 27.50%), marking the first shift towards monetary policy easing in 5 years. The Committee’s decision to cut rates was primarily driven by the sustained disinflationary trend, continued stability of the naira, and robust external reserves.
Additionally, the Committee revised the asymmetric corridor around the MPR to +250bps/-250bps (previous: +500bps/-100bps) and reduced Cash Reserve Requirement (CRR) for Deposit Money Banks (DMBs) to 45.0% (previous: 50.0%). On the other hand, the committee also introduced a 75.0% CRR on non-Treasury Single Account (TSA) public sector deposits to sterilise excess liquidity from higher FAAC distributions driven by increased government revenue. Nonetheless, the CRR for merchant banks, and liquidity ratio were retained at 16.0% and 30.0%, respectively. Looking ahead, we expect further monetary policy easing, supported by projections of sharper declines in inflation in the coming months.
Precisely, headline inflation is likely to trend towards 18.0% by October, which may warrant a more decisive policy adjustment at the next MPC meeting. As such, we anticipate a 100bps reduction in the MPR at the November meeting scheduled for the 24th and 25th.
Capital Markets: Equities
The Nigerian equities market ended the week on a positive note, as late-session gains on the final two trading days more than offset the weak outturns in the earlier part of the week. Investor sentiment was buoyed by the MPC’s first rate cut in five years, which drove renewed interest in equities.
Notably, gains in ZENITHBANK (+9.1%), DANGCEM (+1.7%), STANBIC (+9.3%), WAPCO (+4.0%) and INTBREW (+10.1%) drove the All-Share Index higher by 0.2% w/w to 142,132.02 points, with the month-to-date and year-to-date returns improving to +1.3% and +38.1%, respectively. Trading activity also strengthened, as both volume and value advanced by 73.8% w/w and 257.7% w/w, respectively. Meanwhile, sectoral performance was mixed, as the Industrial Goods (+1.3%), Consumer Goods (+1.2%), and Banking (+1.2%) indices advanced, while the Insurance (-0.9%) and Oil & Gas (-1.6%) indices retreated.
Looking ahead, we expect sentiment to improve further, supported by the more accommodative interest rate environment and the prospect of increased liquidity flows into equities.
Money Market and Fixed Income
The OVN rate declined by 208bps w/w to 24.9% reflecting improved system liquidity from sizeable inflows, including FAAC disbursements (c. NGN1.30 trillion), OMO maturities (NGN254.90 billion) and NTB maturities (NGN201.38 billion). Investor sentiment was further buoyed by the MPC’s 50bps rate cut. Consequently, the financial system’s net long position expanded to an average of NGN3.39 trillion (vs. NGN2.41 trillion in the prior week).
Barring liquidity mop-up operations by the CBN, upcoming inflows from OMO maturities (NGN731.14 billion) and FGN bond coupon payments (NGN164.29 billion) are expected to sustain the system’s robust liquidity, likely exerting further downward pressure on the OVN rate.
Treasury Bills
The Treasury bills secondary market traded on a bullish note following Tuesday’s MPC rate cut. Consequently, the average yield decreased by 45bps w/w to 19.8%. By segment, NTB and OMO yields declined by 49bps and 34bps to 18.0% and 21.7%, respectively.
Given our projections of a sustained liquidity surplus, augmented by the recent 50bps MPR cut, which strengthens the case for accommodative monetary conditions, we expect robust demand for bills to persist, driving yields lower.
Bonds
The FGN bond secondary market maintained a bullish tone, with the average yield down 8bps w/w to 16.5%. Across the curve, the average yield declined at the short (-1bp), mid(-13bps), and long (-1bp) segments, driven by demand for the JUL-2030 (-31bps), JUL-2034 (-42bps), and JUN-2053 (-6bps) bonds, respectively.
Looking ahead, we believe the outcome of this month’s FGN bond auction on Monday (29 September) will largely dictate the direction of yields in the secondary market. At the auction, the DMO will re-open the AUG-2030 and JUN-2032 bonds, offering NGN120.00 billion. While demand in the secondary market is likely to remain strong at the short- to mid-segments, supported by robust system liquidity and the recent MPR cut, we anticipate investors will sustain a cautious stance at the long end of the curve, amid persistent concerns over fiscal sustainability and heightened duration risk.
Foreign Exchange
The naira depreciated this week by 0.2% w/w to NGN1,490.00/USD, despite the USD70.00 million intervention by the CBN. Meanwhile, gross FX reserves increased for the eleventh consecutive week, growing by USD192.95 million w/w to USD42.23 billion (September 25). In the forwards market, the naira rates appreciated across the 1-month (+0.4% to NGN1,516.47/USD), 3-month (+0.6% to NGN1,566.22/USD), 6-month (+0.7% to NGN1,638.41/USD) and 1-year (+1.2% to NGN1,776.61/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
