Global Economy
According to the United States Department of Labor, US initial jobless claims declined by 5,000 w/w, to 229,000 in the week ending 23 August (vs. the week ending 16 August: 234,000) – slightly below the market expectation of 230,000, signalling still-low layoffs. However, the figure remains above the 2024FY average (223,370 claims), reinforcing signs of gradual labour market softening as re-employment opportunities narrow. On a non-seasonally adjusted basis, notable declines were observed in Iowa (-1,317), Virginia (-833) and Maryland (-561), while the most significant increases were recorded in New York (+1,588), Texas (+1,131), and Massachusetts (+674).
Meanwhile, the 4-week moving average rose to 228,500, up by 2,500 from the prior week’s average of 226,000, suggesting underlying weakness despite weekly volatility. Looking ahead, the persistence of claims above the 2024 trend supports the view that the labour market resilience is easing. While not yet flashing recessionary signals, the softening backdrop aligns with the Fed’s cautious stance and could reinforce expectations for a gradual pivot toward rate cuts if incoming inflation data confirms a disinflationary trend.
Based on the data obtained from the Bureau of Economic Analysis (BEA), the United States Personal Consumption Expenditures (PCE) price index was steady at +2.6% y/y in July (June: +2.6% y/y) – in line with market expectations. The outturn reflects the decline in goods prices, amid higher services inflation. Specifically, goods prices increased at a slower pace, rising by 0.5% y/y (June: +0.6% y/y), reflecting the weakness in prices of non-durable goods (0.2% y/y vs. June: 0.5% y/y), despite higher durable goods prices (+1.1% y/y vs. June: 0.9% y/y). However, services inflation inched higher at 3.6% y/y (June: +3.5% y/y), signalling persistent price pressures in this segment.
Excluding volatile food and energy categories, the core PCE price index rose by 2.9% y/y (June: +2.8% y/y), also in line with market expectations (+2.9% y/y). On a month-on-month basis, the PCE price index slowed to 0.2% m/m (June: +0.3% m/m). Looking ahead, consumer prices are likely to hold steady, as easing non-durable goods prices, particularly energy, are likely to offset persistent services inflation. Still, the pass-through of recent tariffs on furnishings, apparel, and electronics could keep core prices sticky. Overall, with PCE inflation broadly in line with expectations and labour market conditions softening, we believe a policy rate cut remains in sight. This view aligns with market expectations, as the CME FedWatch Tool currently prices a 87.2% probability of a cut at the September 17 meeting.
Global Markets
Global equities traded with mixed sentiments as investors balanced political risks, concerns over US Fed independence, and anticipation of US PCE inflation data. US markets (DJIA: 0.0%; S&P 500: +0.5%) were supported by optimism around economic resilience but capped by caution ahead of the Fed’s preferred inflation gauge, with expectations of possible monetary easing next month anchoring sentiment. European equities (STOXX Europe 600: -1.4%; FTSE 100: -1.2%) retreated on renewed French political instability, while Asian markets (Nikkei 225: +0.2%; SSE Composite: +0.8%) advanced, buoyed by tech sector gains, stronger Japanese economic data, and China’s industrial profit rebound. Meanwhile, the MSCI EM (-0.4% w/w) was dragged lower by India (-1.3% w/w), whereas the MSCI FM (+0.8% w/w) gained, led by Vietnam (+2.4% w/w).
Nigeria: Domestic Economy
According to data obtained from the Nigerian Upstream Petroleum Regulatory Commission (NUPRC), Nigeria’s crude oil production (including condensates) increased for the second consecutive month, rising modestly by 0.9% m/m to 1.71 mb/d in July (June: 1.70 mb/d), its highest level since January 2025. The marginal uptick was supported by higher output from key terminals including Brass (+27.0% m/m), Bonny (+12.7% m/m), Agbami (+12.4% m/m), Escravos (+7.2% m/m), Bonga (+4.3% m/m), Odudu (+3.1% m/m), Tulja – Okwuibome (+2.8% m/m) and Forcados (+2.2% m/m), while production from the Qua Iboe (-10.6% m/m) terminal declined.
We attribute the improvement to enhanced pipeline surveillance under the Federal Government’s production recovery efforts, alongside a gradual rebound in upstream investment. Looking ahead, output sustainability will hinge on security effectiveness and timely upstream project delivery, as Nigeria targets consistent OPEC+ compliance and higher FX inflows. Despite improving investment momentum, structural underinvestment keeps efficiency low and output volatile. We expect improved security and gradual investment recovery to support average production above 1.60 mb/d, maintaining our 2025FY forecast at 1.70 mb/d — below the Federal Government’s 2.06 mb/d target.
Federation Accounts Allocation Committee (FAAC) disbursements to the three tiers of government rose by 10.0% m/m to NGN2.00 trillion in August (July: NGN1.82 trillion), supported by higher receipts from Petroleum Profit Tax (PPT), Excise Duty, Electronic Money Transfer Levy (EMTL), Oil and Gas Royalties, Value Added Tax (VAT) and Import Duty, which offset declines in Company Income Tax (CIT) and Customs External Tariff (CET) Levies. The allocation represents 52.2% of July’s gross revenue (NGN3.84 trillion), with the balance directed to transfers, interventions, refunds (NGN1.68 trillion), and collection costs (NGN152.68 billion).
By distribution, the FGN received NGN735.08 billion (July: NGN645.38 billion), States, NGN660.35 billion (July: NGN607.42 billion) and Local Governments, NGN485.04 billion (July: NGN444.85 billion), while oil-producing states got an additional NGN120.36 billion (July: NGN120.76 billion) as derivation (13.0% of mineral revenue). Looking ahead, higher FAAC disbursements should provide short-term fiscal relief across all tiers of government. In the near term, potential revenue gains could stem from improved domestic oil production and stronger CIT collections on the back of firmer macroeconomic conditions.
However, the recent stability of the naira and weaker oil prices may limit FX-related gains from oil receipts, tempering overall growth in FAAC inflows. More broadly, the heavy reliance on volatile oil revenues, alongside frequent deductions for transfers and interventions, underscores structural fragilities in Nigeria’s fiscal framework, suggesting that monthly payouts will remain vulnerable to external shocks.
Capital Markets: Equities
The bears continued to dominate in the Nigerian stock market as selloffs in ZENITHBANK (-5.7%), WAPCO (-3.4%), GTCO (-2.1%), and ETI (-6.8%) caused a 0.5% w/w decline in the NGX All Share Index to 140,284.90 points. Consequently, the MTD and YTD return moderated to +0.3% and +36.3%, respectively. On market activity, trading volume and value declined by 33.0% w/w and 20.5% w/w, respectively. From a sectoral standpoint, declines across the Banking (-1.2%), Insurance (-1.0%), Consumer Goods (-0.9%), Industrial Goods (-0.4%), and Oil & Gas (-0.2%) indices reflected the overall market performance.
In the near term, the absence of clear catalysts is likely to keep sentiment cautious, with selective interest concentrated in fundamentally strong 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 moderated by 5bps w/w to 27.0% supported by improved system liquidity from OMO maturities (NGN758.00 billion) and FAAC disbursements. However, the Central Bank of Nigeria (CBN) sterilized a significant portion of these inflows through two OMO auctions, absorbing NGN1.19 trillion. Despite the aggressive mop-up, liquidity levels remained robust, with the market closing the week at a net long position of NGN1.52 trillion (vs. NGN159.40 billion in the prior week). The surge was further reinforced by heightened placements at the CBN’s Standing Deposit Facility (SDF), where the weekly average climbed to NGN1.20 trillion, nearly three times the previous week’s NGN419.77 billion.
Barring any mop up activity by the CBN, we anticipate that upcoming OMO maturities of NGN459.60 billion will boost system liquidity in the coming week. This should exert downward pressure on OVN rates in the near term.
Treasury Bills
Proceedings in the Treasury bills secondary market were bearish as market participants repriced yields higher in anticipation of higher rates at next week’s PMA. Consequently, the average yield expanded by 23bps w/w to 22.2%. Across the market segments, the average yield increased by 50bps to 18.9% in the NTB segment, while it dipped slightly by 3bps to 25.5% in the OMO segment. To sterilise excess liquidity, the CBN floated NGN700.00 billion across the 83D (NGN300.00 billion) and 84D (NGN400.00 billion) maturities. Demand was robust (total subscription: NGN1.57 trillion; bid-to-offer: 2.2x), with NGN1.19 trillion allotted at elevated stop rates of 26.49% (83D) and 26.50% (84D).
We expect ample system liquidity to weigh on NTB yields, while the CBN will likely maintain elevated OMO rates to sustain FPI inflows. Additionally, the DMO is scheduled to conduct an NTB PMA next week (September 3) with NGN480.00 billion worth of maturing bills on offer.
Bonds
The FGN bond secondary market traded on a bearish note this week as investors positioned ahead of the August bond auction, with the average yield rising by 40bps w/w to 17.1%. Across the benchmark curve, the average yield increased at the short (+38bps), mid (+63bps), and long (+9bps) segments, driven by selloffs of the FEB-2028 (+114bps), JUL-2034 (+165bps), and MAR-2036 (+107bps) bonds, respectively. The DMO conducted an FGN bond PMA on Monday (August 25), reopening the JUN-2032 bond and introducing a new AUG-2030 bond with a total offer size amounting to NGN200.00 billion. Despite robust subscription (NGN268.17 billion; bid-to-offer: 1.3x), the DMO underallotted NGN136.16 billion (bid-to-cover: 2.0x), setting stop rates at 17.95% and 18.00%, respectively, consistent with its tight pricing stance.
Looking ahead, we expect elevated stop rates to anchor yields in the near term as the DMO balances funding needs with investor appetite. However, persistent demand for specific on-the-run papers suggests the curve could flatten modestly if liquidity remains robust and the CBN refrains from additional tightening.
Foreign Exchange
The naira depreciated this week by 0.9% w/w to NGN1,534.00/USD as demand pressures undermined the supply from FPIs looking to participate in the OMO PMA, and (2) the CBN – USD170.00 million sold to banks. Meanwhile, gross FX reserves increased for the eight consecutive week, growing by USD161.06 million w/w to USD41.27 billion (August 29). In the forwards market, the naira rates appreciated across the 1-month (+0.3% to NGN1,572.96/USD), 3-month (+0.6% to NGN1,644.11/USD), 6-month (+1.0% to NGN1,745.84/USD) and 1-year (+1.4% to NGN1,948.07/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
