Global Economy
At its first meeting of the year, the Federal Open Market Committee (FOMC) voted to maintain the federal funds rate within the 3.50% – 3.75% range, in line with market expectations, following three consecutive rate cuts in 2025 that brought policy rates to their lowest levels since 2022.
The Committee highlighted continued solid economic expansion and a stabilisation in the unemployment rate, despite ongoing softness in the labour market reflected in modest job gains. While inflation remains above the Fed’s 2.0% target, policymakers noted that the trade-off between containing inflation and supporting employment has eased.
In its forward guidance, the FOMC reaffirmed its data-dependent approach, emphasising elevated uncertainty around the economic outlook, with future policy adjustments contingent on incoming data and evolving risk dynamics. Earlier rate cuts are expected to continue supporting labour market stability, with policy rates now approaching neutral levels consistent with balanced growth. However, as inflation remains well above the US Fed’s medium-term 2.0% target, the central bank is likely to maintain a cautious stance, refraining from further easing until clearer signs of sustained disinflation emerge. This outlook aligns with market expectations, with the CME FedWatch tool indicating an 84.6% probability of a hold at the 18 March meeting.
According to flash estimates from Eurostat, the Euro Area real GDP expanded at a steady pace by 0.3% q/q in Q4-25 (Q3-25: +0.3% q/q), slightly above market expectations of 0.2% q/q, driven primarily by resilient consumer spending despite subdued export performance. Across the region’s major economies, GDP growth strengthened in Germany (+0.3% q/q vs Q3-25: +0.0% q/q), Italy (+0.3% q/q vs Q3-25: +0.2% q/q), and Spain (+0.8% q/q vs Q3-25: +0.6% q/q), while France recorded a moderation to +0.2% q/q (Q3-25: +0.5% q/q), reflecting weaker investment and government spending despite higher household consumption.
On an annual basis, GDP growth eased marginally to 1.3% y/y in Q4-25 (Q3-25: +1.4% y/y), bringing 2025FY average growth to 1.5% y/y. Euro Area GDP growth is expected to remain resilient over the near to medium term, supported by improved fiscal spending, robust domestic demand amid easing inflation, stable labour market conditions, and improving financial conditions following lower interest rates. Nonetheless, unresolved structural headwinds, particularly in the manufacturing sector and weak exports, may continue to weigh on growth. Accordingly, the IMF projects the region to expand by around 1.3% y/y in 2026E (2025FY: 1.5% y/y).
Global Market
Global equities traded in a choppy range this week as investors tracked geopolitical developments, key macro releases, a heavy slate of corporate earnings, and the latest FOMC policy decision. At the time of writing, US equities were on course to close mixed, with the Dow Jones (DIJA: -0.1%) weighed down by post-earnings weakness in names such as BA and UNH following softer-than-expected results, while the S&P 500 (+0.8%) edged higher, supported by strength in mega-cap technology stocks.
In Europe, risk sentiment was subdued, with major indices (STOXX 600: +0.0%; FTSE 100: +0.2%) closing modestly higher as gains in energy, industrials and commodity-linked stocks offset uneven performance in pharmaceuticals and banks. Markets also digested upside surprises in Euro Area GDP, alongside Germany’s January inflation print. Elsewhere, Asian equities (Nikkei 225: -1.0%; SSE: -0.4%) closed lower, pressured by a stronger yen amid speculation of coordinated intervention by Tokyo and Washington, while investors weighed tighter regulatory scrutiny of speculative trading against expectations of additional policy support in China. Emerging and Frontier markets (MSCI EM: +1.8%; MSCI FM: +0.1%) posted modest gains, led primarily by advances in India (+0.5%) and Vietnam (+1.5%), respectively.
Domestic Economy
According to data from the Central Bank of Nigeria (CBN), Credit to the Private Sector (CPS) declined modestly by 2.8% y/y to NGN75.83 trillion in December (December 2024: NGN78.02 trillion). The contraction reflects the lagged effects of the CBN’s prolonged tight monetary policy stance, alongside the appreciation of the naira, which lowered the naira value of banks’ foreign-denominated assets. At the same time, credit to the government increased by 26.1% y/y to NGN34.22 trillion (December 2024: NGN27.14 trillion), indicating increased government borrowings from domestic banks for deficit financing.
Overall, broad money supply (M3) rose by 9.8% y/y to NGN124.41 trillion, following increases across quasi (+10.4% y/y) and narrow (+8.6% y/y) money supply. On a month-on-month basis, the CPS increased by 1.6% (November: +0.3% m/m to NGN74.63 trillion). Over the medium term, we expect the MPC’s pivot toward monetary easing to support a gradual recovery in credit to the private sector (CPS). Softer financing conditions, coupled with improved liquidity in the banking system, should encourage lending activity and ease credit constraints on businesses and households.
According to the NGX Domestic and Foreign Portfolio Investment Report, total transactions in the Nigerian equities market surged by 62.2% m/m to NGN1.84 trillion in December (November: NGN1.13 trillion). The performance was primarily driven by the higher participation from both foreign (24.9% of gross transactions) and domestic (75.1% of gross transactions) investors. Specifically, transactions from foreign investors rose by 182.7% m/m to NGN458.09 billion (November: NGN162.04 billion), reflecting improved sentiment amid moderating fixed-income yields, while domestic transactions increased by 42.1% m/m to NGN1.38 trillion (November: NGN971.18 billion), supported mainly by stronger retail activity (+54.9% m/m) despite a 7.4% m/m decline in institutional trades.
The spike in activity was also amplified by block trades. Despite higher turnover, the market recorded net outflows of NGN71.80 billion, reversing November’s modest net inflows of NGN360.00 million, likely reflecting investor repositioning ahead of the planned CGT implementation in January 2026. On a year-on-year basis, total transactions increased by 145.1% to NGN13.69 trillion in 2025FY (2024FY: NGN5.59 trillion).
Looking ahead, we expect domestic investors to remain the dominant drivers of market turnover, supported by relatively lower fixed income yields, which should sustain rotation into equities. In addition, relative naira stability and improving macroeconomic conditions are likely to strengthen foreign investor confidence and support renewed participation in the local market over the near term.
Capital Markets: Equities
The local bourse closed the week in negative territory as investors digested a limited set of 2025FY earnings releases. Specifically, profit-taking in MTNN (-1.4%), FIRSTHOLDCO (-8.2%), and DANGSUGAR (-2.4%) outweighed gains in SKYAVN (+28.7%), ABBEYBDS (+32.4%), and NAHCO (+9.1%), pulling the All-Share Index down by 0.1% w/w to 165,370.40 points with the YTD returns moderating to +6.3%. On market activity, trading volume declined by 1.0% w/w, while trading value declined by 4.2% w/w. On sectors, performance was mixed as the Insurance (+0.8%), Consumer Goods (+0.7%), Industrial Goods (+0.1%), and Oil & Gas (+0.1%) indices advanced, while the Banking (-0.6%) index was the sole loser for the week.
Looking ahead, market performance is expected to remain choppy as investors continue to digest the remaining slate of 2025FY earnings releases, which should shape near-term sentiment.
Money Market and Fixed Income
The OVN rate expanded by 4bps to 22.8%, as debits for the OMO (NGN3.79 trillion) and FGN bond (NGN1.54 trillion) primary market auctions outstripped liquidity inflows from OMO maturities (NGN2.14 trillion). Nonetheless, average system liquidity remained strong, closing at an average net long position of NGN6.84 trillion (prior week: NGN2.08 trillion).
In the absence of further mop-up activities, inflows from OMO maturities (NGN1.03 trillion) are expected to bolster system liquidity, potentially exerting downward pressure on the OVN rate.
Treasury Bills
The Treasury bills secondary market closed bullish, driven by the strong system liquidity. Consequently, the average yield across all instruments decreased by 50bps to 19.9%. Across segments, average NTB yields decreased by 28bps to 18.2%, while average OMO yields declined by 86bps to 21.5%. The CBN announced an OMO auction on Tuesday, offering NGN600.00 billion across the 210‑D and 350‑D maturities.
Total subscriptions reached NGN4.80 trillion, yet no sales were made. The CBN announced another OMO auction on Thursday, offering NGN600.00 billion across the 208‑D and 348‑D maturities. Demand remained strong, with total subscriptions reaching NGN5.92 trillion. The CBN ultimately allotted NGN3.78 trillion across both maturities at stop rates of 17.20% and 17.25%, respectively.
Looking ahead, we anticipate bearish sentiments in the Treasury bill secondary market, given the NTB auction scheduled for next Wednesday (February 4), at which the DMO is expected to supply NGN1.15 trillion.
Bonds
The FGN bond secondary market was bullish this week as a significant volume of unsuccessful primary-auction bids entered the secondary market. Consequently, average FGN bond yields decreased by 43bps to 16.5%. Across the curve, the average yield decreased at the short (-73bps) and mid (-35bps) segments, driven by demand for the FEB-2031(-94bps) and APR-2032 (-88bps) bonds, respectively, while it closed flat at the long end.
At Monday’s FGN bond auction, the DMO reopened the FEB-2031, FEB-2034 and JAN-2035 bonds, offering a total of NGN900.00 billion. Total demand settled at NGN2.25 trillion (bid-to-offer: 2.5x), with the DMO eventually allotting NGN1.54 trillion (bid-to-cover: 1.5x) at respective stop rates of 17.62%, 17.50%, and 17.52%.
Next week, bearish sentiments may return following the expectations of elevated stop rates at the NTB auction scheduled for next week.
Foreign Exchange
The naira appreciated strongly this week by 2.4% w/w to NGN1,390.50/USD, supported by the robust inflows from offshore players seeking to participate at the OMO and FGN bond PMA. Also, the gross FX reserves increased this week by USD75.66 million w/w to USD46.11 billion (January 28). In the forwards market, the naira rates appreciated across the 1-month (+2.4% to NGN1,413.23/USD), 3-month (+2.5% to NGN1,453.70/USD), 6-month (+2.2% to NGN1,516.99/USD) and 1-year (+3.5% to NGN1,612.52/USD) contracts.
We expect the naira to remain broadly stable in the near term, supported by a weaker dollar and a favourable external position characterised by a sustained current account surplus and strong foreign exchange reserves. In addition, continued investor confidence and elevated naira yields should sustain capital inflows, helping to anchor the exchange rate.
