Nigeria's Inflation: A Marginal Ease Amid Persistent Challenges
Investment Research Weekly Market Commentary | Jun 23, 2025
Welcome to this week’s edition of our stock market newsletter!
Green White Green Recap
Macro Update
Nigeria's Inflation: A Marginal Ease Amid Persistent Challenges
Nigeria's headline inflation rate eased slightly to 22.97% in May 2025, marking the second consecutive monthly decline from 23.71% in April and 24.23% in March 2025. While this downward movement offers a statistical reprieve, it provides little immediate relief for most Nigerians who continue to grapple with elevated living costs. Crucially, on a year-on-year basis, May 2025's inflation rate is significantly lower than the 33.95% recorded in May 2024, though this notable drop is partly attributed to the rebasing of the Consumer Price Index (CPI) by the NBS in January 2025, which adjusted the inflation basket and base year.
Despite the statistical easing, essential prices, particularly for food and energy, remain stubbornly high. This persistence is fuelled by a confluence of factors including ongoing supply chain issues, insecurity in food-producing regions, and the lingering effects of the fuel subsidy removal. This situation starkly contrasts with the average Nigerian's daily reality, where the rate of price increases, while slowed, still translates to considerably higher actual prices, continually eroding the value of incomes and savings. While the current government inherited a complex economic landscape where inflation steadily rose under the last administration, contributing to naira weakening and widespread hardship, the effectiveness of ongoing monetary policy adjustments, such as the central bank's interest rate hikes, remains under scrutiny. Without fundamental economic reforms addressing core issues like insecurity, infrastructure deficits, and productivity, the path to sustained stability and significantly lower inflation will likely be a long and challenging journey for the Tinubu administration. Nigerians should anticipate continued economic adjustments and a cautious outlook on real purchasing power.
Key Takeaways:
A slight ease in the headline inflation rate to 22.97% in May 2025 represents the second monthly decline but offers limited tangible relief to citizens.
While statistically lower than May 2024 (33.95% due to CPI rebasing), core challenges persist, particularly in food and energy prices.
We still advise caution with long-term investments in naira-denominated assets, as inflation remains vulnerable to various domestic and global factors without comprehensive reforms.
FX Update
Nigeria's Reserves Dip as Naira Navigates Dual Markets
The Nigerian naira has continued to face fluctuations in the foreign exchange market, against a backdrop of a further dip in the nation's external reserves.
Naira Exchange Rate Performance: As of June 20, 2025, the Nigerian naira showed contrasting movements in its official and parallel market rates:
Official Exchange Rate: The naira experienced an appreciation of approximately 2.31%, moving from ₦1,584.00/$1 on June 14, 2025, to ₦1,547.36/$1 as of June 20, 2025. This strengthening in the official market indicates some positive shifts in dynamics within that segment.
Parallel Market Rate: In contrast, the parallel market saw a more significant depreciation of approximately 4.91%, with the rate moving from ₦1528/$1 on June 14, 2025, to ₦1605/$1 on June 20, 2025. This widening gap between the official and parallel rates highlights persistent challenges in FX liquidity and market pressures.
External Reserves Update: Nigeria's external reserves experienced a further decrease this week, highlighting ongoing challenges in shoring up the nation's foreign exchange holdings. The reserves declined by 0.11% from $37.780 billion on June 17, 2025, to $37.738 billion as of June 18, 2025. This figure is near levels last observed in late April/early May 2025, and it marks a continued descent from the 2025 year-high of $40.92 billion recorded on January 6, 2025, representing a fall of over $3 billion from that peak. This persistent decline signals continued pressure on dollar supply despite the recent volatility in global oil prices, underscoring the need for sustained measures to boost foreign currency inflows.
Key Takeaway:
The dual movements in Nigeria's foreign exchange markets, with an appreciation in the official rate against a depreciation in the parallel market, coupled with the continued decline in external reserves, underscore the ongoing complexities and liquidity challenges in the nation's foreign exchange environment. These dynamics will continue to be a critical focus for policymakers and investors alike.
Remember to save dollar-based goals in dollars, which can be done with apps like Ladda.
Equities Update:
NGX Records Positive Weekly Performance with Mixed Sectoral Results
The Nigerian equities market concluded the week ending June 20, 2025, with a positive performance, as the NGX All-Share Index (ASI) recorded an appreciation of +2.35%. This brings the year-to-date (YTD) performance of the ASI to a robust +14.78%.
Sectoral performance, however, remained mixed.
The Banking Sector saw a gain of +3.58% for the week, and its YTD performance stands at +16.34%.
The Consumer Goods Sector demonstrated strong positive momentum, closing up by +2.16% for the week, and boasts an impressive YTD return of +45.59%.
The Insurance Sector also recorded a gain of +2.37% for the week, with its YTD performance remaining modest at +0.80%.
The Oil and Gas Sector experienced a significant gain among the tracked sectors for the week, rising by +5.27%, though its YTD performance remains negative at -7.80%.
Conversely, the Industrial Goods Sector closed lower by -0.36% for the week, and its YTD return remains negative at -1.59%.
Key Takeaways:
The overall positive movement of the All-Share Index for the week, coupled with varied performance across sectors, indicates evolving investor sentiment and strategic positioning within different segments of the Nigerian economy.
Investors are encouraged to observe these sectoral shifts closely for potential opportunities and risks in the dynamic market environment.
Fixed Income Update
Nigerian Treasury Bill Auction Results: June 18, 2025
The Central Bank of Nigeria (CBN), acting on behalf of the Debt Management Office (DMO), successfully conducted its latest Primary Market Auction for Treasury Bills on Wednesday, June 18, 2025. This auction demonstrated robust investor participation across all tenors, with the 91-day bill offered at ₦22.02 billion and attracting ₦72.63 billion in subscriptions, closing with a marginal rate of 17.80%. The 182-day bill, with ₦40.00 billion offered, saw ₦63.56 billion in subscriptions and a marginal rate of 18.35%. Notably, the longer-dated 364-day bill was significantly oversubscribed, with ₦100.00 billion offered drawing ₦1,097.38 billion in total subscriptions, settling at a marginal rate of 18.84%.
This strong investor appetite for Nigerian treasury bills, particularly for the longer-tenured instruments, underscores the prevailing liquidity in the fixed-income market. Investors clearly favoured locking in higher yields, a trend that reflects the current economic climate and the continued attractiveness of government securities in Nigeria as a preferred investment option.
Treasury Bill Yields Show Mixed Movement, Bond Yields Stable
As of June 20, 2025, yields on Nigerian treasury bills (T-Bills) presented a mixed picture across different tenors, while bond yields remained relatively stable. This indicates a dynamic interplay of market forces, including liquidity conditions and investor sentiment.
Here are the treasury bill and bond yields as of June 20, 2025:
90-day T-Bill: The yield stands at 18.35%.
180-day T-Bill: The yield is 20.59%.
364-day T-Bill: The yield is 21.93%.
The yield on the benchmark bond is currently at 18.23%.
Key Takeaways
High T-Bill yields reflect the CBN's focus on managing inflation and attracting foreign investment.
Stable bond yields suggest a balanced long-term debt market.
The government continues to offer attractive returns on securities to draw in liquidity.
You can invest in treasury bills to save for your short-term goal on rent, schools, fees, etc., through Ladda—a fintech app that helps you save at high returns.
For long-term goals, naira-denominated fixed income instruments are not suitable due to inflation and currency risks .
Star-Spangled Banner Recap
Iran-Israel Conflict: Geopolitical Tensions Create Market Uncertainty
The ongoing Iran-Israel conflict is generating significant uncertainty across global financial markets, causing investors to exercise caution and influencing market sentiment. This situation highlights how rapidly geopolitical events can impact everything from energy prices to overall investor confidence, underscoring the interconnectedness of global politics and finance.
The conflict's primary market impact is on oil supply and prices, given Iran's major role as an oil producer and its strategic location near the Strait of Hormuz, a vital global oil transit point. Fears of supply disruptions have already led to a “risk premium” on oil prices. Beyond oil, this heightened geopolitical risk also shifts investor appetite towards “safe-haven” assets like gold, the US dollar, and government bonds, as market participants seek to protect capital from potential losses amid sustained volatility.
Specific Sectors and Stocks to Watch:
Geopolitical tensions from the Middle East differentially impact market sectors: Energy and Defense and Aerospace typically benefit from rising oil prices and increased military spending respectively. Conversely, Airlines & Travel and Consumer Discretionary sectors face pressure due to higher fuel costs and reduced consumer spending, while safe-haven assets like gold and gold mining companies see increased demand amid uncertainty.
US Federal Reserve Navigates Inflation and Growth Concerns
The US Federal Reserve (Fed) concluded its June 2025 meeting by holding its benchmark interest rate steady at 4.25% to 4.50%, marking the fourth consecutive meeting without a change. While the Fed acknowledged some inflation cooling, its updated economic projections signal a cautious outlook. Policymakers now anticipate two rate cuts later in 2025, an increase from their prior forecast, but simultaneously raised their core personal consumption expenditures (PCE) inflation forecast to 3.0% by year-end, partly due to expected tariff impacts.
This delicate balancing act reflects the Fed's ongoing challenge to manage inflation while monitoring signs of slowing economic growth. The updated projections also show a lowered GDP growth forecast for 2025 (1.4% from 2.1%) and a rising unemployment rate, expected to reach 4.2% by year-end. Fed Chair Jerome Powell emphasised the potential for tariffs to push up prices and weigh on economic activity. While the Fed expects this inflationary bump to be temporary, they are adopting a “wait-and-see” approach, closely scrutinising incoming data for clearer signals before making any further policy adjustments. Markets are generally pricing in a high probability of a rate cut as early as September 2025.
Major Stock Markets Performance as at June 20, 2025:
Here's how key global indices have performed, reflecting the market's cautious reaction to the geopolitical landscape:
S&P 500 (US): Decreased by -1.28% this week, pushing its year-to-date return to approximately 1.47%.
FTSE 100 (UK): Saw a loss of -0.86%, bringing its year-to-date return to approximately +7.36%.
Nikkei 225 (Japan): Increased by 0.24%, bringing its year-to-date return to approximately -3.74%.
CAC 40 (France): Decreased by 1.24%, but its year-to-date return is approximately 2.83%.
MSCI World Index: Lost approximately -1.88%, pushing its year-to-date return to approximately -9.20%.
Key Takeaways:
The Iran-Israel conflict highlights how geopolitical events fuel market volatility, mainly via energy prices and investor confidence.
For general investors, diversifying portfolios with defensive sectors and safe-haven assets is key. A long-term view helps navigate short-term turbulence.
Remember to always save for your dollar goals in dollars. You can do this with us on Ladda—a fintech app that helps you save at high returns.
We hope you find this edition insightful, and as always, stay focused on your financial goals!
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