May 2025

Economy Overview

Global Highlights for May 2025

On the global scene, the U.S. Personal Consumption Expenditures (PCE) Price Index, the Federal Reserve’s preferred inflation gauge, eased for a second consecutive month in April 2025, reaching 2.1%, the lowest level in seven months, down from 2.3% in March and below market forecast of 2.2%.

Similarly, core PCE inflation, which excludes food and energy, declined to 2.5%, its lowest since March 2021, from an upwardly revised 2.7% previously, which is in line with expectations. On a monthly basis, the core PCE index, also went up 0.1% after an upwardly revised 0.1% in the previous month, in line with forecasts. Following a flat reading in March, the U.S. headline PCE price index rose by 0.1% month-over-month in April 2025, matching market expectations.

U.S. Fed Holds Rates Steady Amid Elevated Uncertainty

For the third consecutive meeting, the U.S. Federal Reserve left the benchmark rate unchanged citing that uncertainty remains unusually high. The Fed cited rising downside risks to both employment and economic activity, as well as upside risks to inflation. In its statement, the central bank acknowledged that recent tariff hikes have been significantly larger and more widespread than expected. It also flagged considerable uncertainty surrounding the direction of trade policy, including the magnitude, scope, timing, and duration of its economic impacts.

Oil Prices Volatile Amid Global Trade Uncertainty

Brent crude prices opened the month of May 2025 at $61.06 per barrel, spiked to a monthly high of $66.80 per barrel in the month but closed the month at $62.78 per barrel, highlighting persistent volatility in the global oil market. The level of volatility in the crude oil market stems from the uncertainty in global trade and its resultant effect on the global economy and energy demand. Additionally, the potential for increased output from OPEC+ and rising crude exports from Iran and Ukraine could amplify supply surpluses, especially as demand falters, posing downside risks to external reserves and fiscal buffers

Local Market Recap for May 2025

Equities Rally, Fixed Income Shows Renewed Interest

The Nigerian Exchange (NGX) All-Share Index (ASI) closed May at 111,742.01 points, gaining 5.62% month-on-month (MoM) and pushing the year-to-date (YTD) return to 8.56%. Market capitalization expanded by ₦3.96 trillion in May rising from ₦66.50 trillion in April to ₦70.46 trillion, driven by broad-based investor interest across different sectors and a relatively stable macro-policy environment. Sectoral performance was bullish across major sectors:

• Banking Index rose +1.86% as the sector continued to benefit from attractive valuations and robust Q1 results.
• Consumer Goods Index inched higher by +18.71% MoM, leading the charge on the back of strong earnings and bargain hunting.
• Industrial Goods Index closed at +2.39% MTD, lifted by demand in cement majors.
• The Oil & Gas sector recorded a decline of -1.17% MTD, slipping marginally due to weak sentiment in select counters.

Fixed Income Market: Mild Bullish Rebound

Market sentiment in the Fixed income market turned slightly bullish. Average yield closed at 18.34%, up from 18.69% in April, with investor activity concentrated along the mid- to long-tenor instruments.

At the April FGN bond auction, the DMO raised ₦300.69 billion, with the 19.30% FGN APR 2029 and 19.89% FGN FEB 2033 bonds clearing at 18.98% and 19.849%, respectively. Post-auction demand spurred renewed activity in the secondary market, driving yields marginally lower.

The Nigerian Capital Market

Treasury Bills Market (NTB)

The NTB market remained largely stable with ₦615.80 billion allotted across tenors at stop rates of 18.00% (91-day), 18.50% (182-day), and 19.56% (364-day).

Our Position

We expect the Nigerian equities market (NGX) to maintain a cautious upward trajectory, supported by ongoing corporate earnings growth and potential earnings re-rating. However, global market volatility and persistent domestic inflationary pressures pose risks to investors’ sentiment.

In the Fixed income space, we anticipate a further moderation in yield levels, driven by a gradual decline in inflation.

This should help preserve positive real returns to retain foreign portfolio interest amid global risk aversion.

Securities Recommendations: