December 2024

Economy Overview in December

Foreign Economy Overview

The November inflation report provided further evidence of persistent underlying price pressures in the U.S. economy. Core Consumer Price Index (CPI) increased by 0.3% month-over-month (m/m), aligning with consensus estimates, while the year-over-year (y/y) headline CPI rose to 2.7% from 2.6% in the previous month. Core inflation on an annual basis remained anchored at 3.3%, signaling limited progress in reducing structural inflation drivers.

November’s core CPI uptick, following four consecutive 0.2% m/m increases, reflects the stickiness of price dynamics and reinforces concerns that disinflationary momentum toward the Federal Reserve’s 2% target may be faltering. This persistent inflation backdrop could recalibrate market expectations around the Fed’s policy path, potentially tempering the magnitude and timing of anticipated rate cuts in 2025.​

Consequently, the Fed’s third 25bps rate cut of 2024 lowered its target range to 4.25%–4.50%. The move balances economic resilience with elevated real rates, as forward guidance now signals two rate cuts in 2025. The Fed’s data-driven approach reflects vigilance in managing inflation while aiming for a soft landing.

Oil prices experienced an uptrend as brent crude closed the month at $73.92 per barrel (vs. $72.79 per barrel in November) as investors awaited new drivers, including upcoming U.S. economic data that might impact the Federal Reserve’s interest-rate predictions for 2025, as well as policies from incoming President Donald Trump.

Local Economy Overview
Nigeria’s inflation rate accelerated to 34.60% y/y in November 2024, up from 33.88% in October, marking the third consecutive monthly increase and reaching a six-month high. The outturn exceeded market expectations of 34.30%, driven by surging food prices, exchange rate depreciation, and higher transportation, housing, and utility costs.

Food inflation rose to 39.93% from 39.16%, despite seasonal relief from the harvest, reflecting lingering supply chain disruptions and elevated input costs. Core inflation, which strips out volatile food and energy components, increased to 28.75% from 28.37%, underscoring broad-based and persistent price pressures across the economy.​While inflation is projected to peak in the near term, a gradual disinflationary trend is anticipated as the base effects of fuel subsidy removal and naira devaluation diminish. However, recent fuel price adjustments and flooding in key agricultural regions have reversed prior gains in food prices, complicating the inflation outlook.

The Nigerian Capital Market

The Domestic Equity Market closed with a bullish performance in December, posting a 5.56% m/m gain, increasing from 97,506.87 as of November 29, 2024, to 102,926.4 as of December 31, 2024. The NGX ASI YTD closed the month at c.37.65% (v. 30.40% in November 2024) as market capitalization improved to c.NGN62.76trillion.

On a month-on-Month basis, sectoral performance showed some gains on the Banking (+5.99%m/m), Insurance(+1.30%), and Oil & Gas indices(+13.89%).

Going into 2025, we expect the USDNGN exchange rate to stabilize, inflation to moderate, and the Monetary Policy Rate to ease to about 27.25% as the CBN shifts from its prior tightening stance. The Nigerian market should remain positive, with banks benefiting from high interest rates, though 2025 profit growth will likely slow compared to 2023 and 2024, while the banking recapitalization exercise extends into the year.

The Fixed Income Market

The Nigerian Fixed Income Market closed with a bearish theme in the month of November. Major interests were within the belly to the end of the curve. Consequently, average rose closing at c.19.59% (vs. 19.38 % in November ‘24).​

At the FGN Bond Auction, the DMO offered three maturities- Apr ’29 and Feb ’31, with stop rates at 21.14%, and c.22.0% respectively. The DMO sold a total of N211.14billion with Total bid/cover ratio at c.0.76x.​

At the last NTB primary auction conducted during the month, stop rates stood at 18%, 18.5% and 22.90% for the 91-day, 182-day and 364-day papers, respectively. The DMO allocated N332.4 across the three tenors. ​

The outlook for January will likely be influenced by persistent high inflation, continued restrictive monetary policies, and fiscal measures aimed at stabilizing the economy. These factors will shape investor sentiment and market dynamics, with a focus on how the central bank and government manage inflationary pressures and foster economic resilience.​