Last week, system liquidity remained firmly in surplus territory, above ₦1 trillion, with no OMO auctions conducted, keeping money market rates anchored in the 26% range. The excess liquidity spilled into the secondary market, where selective interest was observed across key maturities, most notably the 2029s, 2031s, new 2032s, 2033s, and 2034s, trading around the 16% levels alongside longer-dated NTBs (20-Aug., 19-Mar., 26-Mar., 16-Dec., 25-Dec., 3-Sept.) and OMO (7-Apr., 17-Feb., 20-Jan., 2-Mar., 17-Mar., 25-Nov.) bills. Despite the activity, the tone of the market leaned bearish as investors positioned ahead of key macroeconomic data. On the policy front, the scrapping of the 5% telecom excise duty marked a significant boost for Nigeria’s capital markets, particularly the heavily weighted telecom sector on the Nigeria Exchange (NGX). The move is expected to ease regulatory cost burdens, stabilize earnings following January’s tariff hikes, and support dividend sustainability, while signaling a more market-friendly regulatory posture that could bolster foreign investor sentiment.
On the fiscal front, the Federal Government confirmed that the ₦54.99 trillion 2025 “Budget of Restoration” will commence by the end of September, even as the 2024 plan closes with 80% performance. The early rollout emphasizes growth stimulation, ward-based programmes, and debt servicing of ₦14.3 trillion earmarked, anchored on fiscal discipline and improved statistical systems. While this continuity in spending should support liquidity, equities, and domestic growth, heavy debt obligations imply sustained bond supply, keeping upward pressure on yields. Global sentiment was dominated by U.S. data, where August CPI rose 2.9% YoY and payroll revisions showed 911,000 fewer jobs through March, pointing to stagflationary risks. Markets swiftly repriced for a dovish Fed pivot, with Treasuries rallying and rate-cut expectations of 75bps priced in by year-end. Meanwhile, the ECB held rates at 2% and signaled policy stability, while gold traded cautiously in a narrow range, ending the week 0.65% higher at $3,647.87. Oil markets swung sharply on geopolitical risks and supply concerns, but Brent ultimately settled just below $66 per barrel, reflecting the fragile balance between OPEC+ supply moves and weakening demand signals.
The liquidity position opened with a surplus of over ₦2trillion on Friday, closing out a mega liquidity week. Money market rates held steady through the week, with the Open Repo Rate (OPR) and Overnight (O/N) anchored around 26.50% and 26.96% respectively, before closing the week at 26.50% and 26.96% respectively. In the FX market, the Naira traded between $/₦1,497.00 and $/₦1,531.00 during the week, closing at $/₦1,503.50 on Friday.
Nigeria’s external reserves rose modestly from $41.57bn to $41.66bn, with liquid balances driving the gain while blocked reserves held steady at $667m (1.6%). System liquidity remained ample throughout the week, peaking at about ₦2tn on Friday, even as the Naira held relatively steady, firming slightly from $/₦1,506.84 to $/₦1,501.50/$. Though the reserve accretion and FX stability provide near-term comfort, the surge in domestic liquidity poses a risk of spilling into speculative demand where left unchecked. To preserve the Naira’s stability, the CBN will likely need to strike a balance by deploying calibrated OMO auctions or sterilization measures to absorb excess cash while sustaining inflows from oil, remittances, and portfolio investments. The approach ensures that liquidity remains supportive for domestic markets without exerting undue pressure on the currency or eroding fragile external buffers.
With no auction in sight and a highly liquid system throughout the week, investors’ focus was channelled towards the mid-tenor bonds as the secondary market experienced a drop in yields, giving in to a bullish run. The market currently has its threshold fixed at 16% as most mid-tenor bonds were seen trading between the 16.40% and 16.90% levels. These activities seemed to quiet down a bit on Friday as more supplies trickled through the market with fewer demands to match. Closing yields for the week showed notable declines for select bonds, with the 17-APR-2029 down 111bps to 16.66%, the FEB-2031s lower by 93bps to 16.54%, and the 21-JUN-2053 7bps decline to 15.94%, reflecting strong demand. The 26-APR-2029 eased 40bps to 16.67%, while the MAR-2027 slipped 28bps to 16.97%. In contrast, the 18-JUL-2034 (16.83%) and the 27-MAR-2035 (16.63%) were largely unchanged.
The scrapping of the 5% telecom excise duty is broadly positive for Nigeria’s capital markets, particularly telecom stocks, which make up a significant weight on the NGX. By reducing regulatory cost burdens, the policy would help stabilize operators’ earnings outlook after January’s 50% tariff hike, supporting investor confidence in the sector’s ability to sustain margins and dividend pay-outs. Consumer relief, though modest, could also bolster data demand and revenue growth, lowering subscriber churn risk. Overall, the policy reversal signals a friendlier regulatory stance that could improve market sentiment and foreign investor perception of Nigeria’s policy environment, although fiscal risks remain.
With the Federal Government of Nigeria’s confirmation that its year 2025 ₦54.99 trillion “Budget of Restoration” will commence by the end of September, market attention is shifting to its near-term implications for liquidity, sectorial activity, and fiscal sustainability. The national budget, which follows an extended 2024 plan with about 80% performance, is anchored on growth stimulation, stronger public services, and investment attraction, with key focus areas including ward-based programmes, tax reforms, and ₦14.3 trillion in debt servicing. Early rollout signal continuity in government spending, a positive for system liquidity, construction activity, consumer demand, and, by extension, equities. Nonetheless, the heavy debt servicing load indicates the likelihood of persistent bond supply, keeping upward pressure on yields unless non-oil revenue mobilisation improves. The execution pace, especially on capital projects, will remain critical, as procurement delays and implementation risks could temper the growth impact. Generally, the announcement provides a mild sentiment boost, but fiscal credibility and delivery will be closely scrutinized in the coming quarters.
August data painted a nuanced picture for U.S. markets, where inflation showed renewed stickiness even as labour momentum weakened. Headline CPI accelerated to 2.9% YoY, its highest since January, driven by food, autos, and energy. On a monthly basis, CPI rose by 0.4%, outpacing expectations, while shelter costs remained the largest contributor. Core inflation held steady at 3.1%, reflecting the persistence of structural pressures. At the same time, the Labour Department’s payroll revision revealed 911,000 fewer jobs from earlier estimates, with August adding just 22,000 jobs and unemployment rising to 4.3%, highlighting a broad-based slowdown in services-led hiring. Both combinations sharpened economic decline and inflationary concerns. Markets quickly repriced Fed expectations: the 10-year Treasury yield fell to 4.0%, a five-month low, as investors shifted focus from inflation to growth risks, with analysts now pricing 75bps of cuts by year-end, beginning at next week’s Federal Open Market Committee (FOMC) meeting.
The asset-class impact is bifurcated. Equities faced a mixed outlook; rate-sensitive growth stocks remained pressured by “higher-for-longer” inflation risks, but defensive and dividend-paying names could benefit from lower yields. Treasuries gained on safe-haven demand, though long-end yields remained anchored higher due to tariff-driven inflation expectations, deepening the yield curve inversion. The U.S. dollar stayed supported by relative policy credibility, while cross-asset volatility was likely to persist as investors weighed near-term Fed easing against medium-term inflation stickiness.
Worthy of note, was the fact that the European Central Bank (ECB) kept rates unchanged at 2%, with President Lagarde signaling confidence that the Euro area was “in a good place.” Inflation projections were slightly softer than June’s outlook, headline at 1.9% in 2027, core at 1.8%, suggesting alignment with the target. Growth conditions remained resilient, while easing trade uncertainty reduced near-term downside risks. However, the President emphasized that the outlook was still “unusually uncertain,” keeping the ECB firmly data-dependent.
Money markets now assign only a 50% probability of one additional cut by next spring, investors interpret this as the likely conclusion of the ECB’s easing cycle. Rates are expected to stay anchored near current levels for an extended period, capping eurozone bond upside but lending support to the euro as the policy gap with the Fed narrows. The market narrative shifts from “how much more easing” to “how long rates remain steady,” with focus on inflation risks, domestic demand durability, and spill overs from U.S. monetary policy.
Gold prices moved in a tight but telling range through the week, as traders weighed Fed policy expectations against safe-haven demand. The metal opened at $3,624.34 on Monday and advanced 0.8% to $3,653.52 on Tuesday, before slipping 0.2% to $3,646.78 on Wednesday and 0.4% on Thursday amid a stronger U.S. dollar. A late-week rebound of 0.4% lifted gold to $3,647.87 on Friday, leaving it 0.65% higher overall compared to the prior week’s close. The swings highlight investors’ cautious positioning as inflation data and global policy signals continue to shape market sentiment.
The Nigerian Exchange (NGX) All-Share Index (ASI) maintained a positive trajectory through the week, rising from 139,394.75 on September 8 to 140,546.00 by September 12, representing a 0.8% gain (about 1,151points). The uptrend reflects renewed investor appetite, supported by robust system liquidity, selective interest in banking, consumer goods, and industrial stocks, as well as expectations of a softer August inflation print and potential policy easing. While sentiment remains upbeat, profit-taking and upward adjustments could moderate the rally in the near term.
Oil markets swung sharply through the week of September 8–12, 2025, as prices oscillated between geopolitical risk premiums and renewed oversupply fear. The week opened firm, with Brent advancing 2.1% to trade above $67 per barrel and WTI up 1.8% near $63, supported by OPEC+’s smaller-than-expected October output hike of 137,000 bpd and heightened geopolitical risks after Russia’s largest aerial strike on Ukraine and Israeli bombardments in Doha. Tighter Middle East shipping flows further reinforced the early gains.
By midweek, momentum reversed as the International Energy Agency projected stronger supply growth and U.S. crude inventories posted a surprise 3.9 million-barrel build, including a rise at Cushing. Coupled with Saudi export ramp-ups to China and weakening U.S. demand signals, benchmarks slipped into the red. By Friday, Brent eased 1.6% to settle just below $66 per barrel, while WTI fell 2.2% to close under $62. Despite midweek softness, both contracts ended the week marginally higher, underscoring a fragile balance where geopolitics provided support but oversupply risks and the slowing demand cap upside.
The week ahead is shaped by anticipated inflows of over ₦603bn from OMO maturities, NTBs, and coupon payments, an injection that could further push system liquidity higher. This surge raises expectations that the CBN may deploy fresh OMO auctions to sterilize excess cash and stabilize yields; otherwise, we may witness yields breaking the current 16% threshold to test lower. A scheduled NTB auction, with an estimated ₦290bn offer (notably lower than the previous issuance), will also test market appetite.
August inflation (due Sept. 15) is expected to print softer and, combined with globally steady monetary trends tilted toward easing, could reinforce expectations of a near-term policy adjustment. With liquidity conditions likely to remain elevated, the risk of oversubscription and potential overselling at the NTB auction appears high.
On the global front, rising expectations of a U.S. Federal Reserve rate cut, where realized, would hold positive implications for emerging markets like Nigeria. Lower U.S. yields could support Eurobond demand, reduce the government’s external borrowing costs, and improve overall financing conditions. Market sentiment is broadly tilted toward a dovish terrain, as investors increasingly price in the prospect of lower policy rates and easing inflation pressures.
By: Sandra A. Aghaizu
₦603bn flows into the system this week,
A tide of cash swelling the banks of liquidity.
If the CBN casts OMO nets, the waters may steady,
But if not, yields could slip beneath 16%,
Pulled lower by the flood.
The NTB auction offers a slimmer harvest,
₦290bn spread thin across eager hands.
Investors circle like birds in the dry season,
Too many wings for too few grains,
Their hunger is certain to oversubscribe the field.
Inflation whispers of softness,
A gentler print than the month before,
Stirring hopes of easing policy ahead.
And far across the ocean,
The Fed leans dovish,
Its softer winds reach Nigerian shores,
steadying Eurobond seas
and lightening the sails of borrowing.
So the market drifts between flood and breeze,
Between risk and promise,
With eyes fixed on the horizon,
Waiting to see
What lies ahead.
