June 2, 2025/United Capital Report
Markets Rebound as Trade Tensions Ease, Central Banks Turn Dovish
US markets rebounded strongly despite a holiday-shortened week, with major indices rising over 2.00%, recovering most of the prior week’s losses. Positive momentum came from easing trade tensions and a sharp rebound in consumer confidence. President Trump walked back his threat to hike EU tariffs after a constructive call with European Commission President von der Leyen, easing investor anxiety. Sovereign bond markets also rallied after speculation that Japan might reduce long-duration issuance, pulling global yields lower and boosting demand for US Treasuries. Strong foreign participation in the week’s 2-, 5-, and 7-year auctions added to the supportive backdrop. Tariff-related legal uncertainty escalated midweek, with the Court of International Trade ruling key IEEPA-based tariffs illegal, a decision the US DOJ quickly appealed. US-China tensions flared again, with fresh threats on tech restrictions and student visas. Trump’s intense rhetoric was tempered by a softer tone during a press event, hinting at possible dialogue with China’s President Xi.
European equities ended May on a strong note, with the STOXX 600 climbing by 4.00% m/m and Germany’s DAX leading the region, up by 6.70% m/m and nearing record highs. Travel, leisure, industrials, and defense stocks outperformed, helping the region recover from earlier trade-related volatility. Although President Trump’s late-May tariff threats briefly rattled investor sentiment, his subsequent reversal allowed markets to regain their footing. Still, the unresolved US-EU trade tensions remain a headwind. Germany’s DAX now sits ~15.00% above its 200-day moving average, well ahead of the S&P 500’s 2.00%, raising questions around sustainability. For the month, Central banks in the region were broadly dovish: the Bank of England cut rates by 25bps in May, and the European Central Bank is widely expected to follow in June, though the decision is not yet a done deal. Norges Bank and Riksbank, however, kept rates on hold.
Asian equities were broadly higher in May, with the Nikkei, Hang Seng, and South Korea’s KOSPI each rising ~ 5.00%. Markets were buoyed by the mid-month thaw in US-China tensions, particularly the Geneva agreement on tariffs which helped lift sentiment across the region. However, renewed friction later in the month, highlighted by President Trump’s criticism of China’s compliance, eroded some of that momentum. In Japan, the Nikkei moved back, now sitting near its 200-day moving average after recovering from prior drops. In China, both Hong Kong and mainland indexes posted gains, supported by fresh stimulus from the PBOC aimed at countering weak domestic growth and tariff risks. That said, optimism faded as US officials signalled stalled trade talks and hinted at further tech restrictions and visa revocations for Chinese students, all of which have added fresh uncertainty to the market outlook.
Brent crude futures slipped by1.40% last week, although it closed May up by 4.70% m/m. A weaker US dollar and signs of easing US-China tensions earlier in the month helped lift prices from their recent lows of $59.00/bbl. Nonetheless, the 50-day moving average acted as firm resistance once again. Looking ahead, the OPEC+ meeting over the weekend drew attention amid reports of a potential larger-than-expected supply increase. Meanwhile, geopolitical uncertainty around Iran-US relations, Russia-Ukraine developments, and Canadian wildfire disruptions remained key factors shaping sentiment.
This week, markets will be watching several key macro and policy developments. In the US, attention will be turned to the ISM manufacturing and services surveys, alongside a packed labor market calendar featuring JOLTS, ADP, and the official nonfarm payrolls report. Globally, focus will be shifted to China’s PMIs, Euro Area inflation, and South Korea’s general election. Central banks are back in the spotlight, with rate decisions expected from the ECB, Bank of Canada, and Reserve Bank of India, all likely to deliver interest rate cuts. Fed Chair Powell will speak on Monday, while other Fed officials are also scheduled to speak throughout the week. Bond markets will monitor a mix of US Treasury Bill auctions and longer-duration issuances in Europe and Asia. Meanwhile, the OPEC+ meeting over the weekend could set the tone for oil prices. With earnings season mostly wrapped up, macro data and policy signals will likely drive market sentiment.
Macroeconomic Highlights
Nigeria’s public debt is set for another significant jump as President Bola Tinubu has requested the National Assembly’s approval to secure fresh foreign loans amounting to about $24.14bn. The fresh borrowing is composed of $21.54bn, €2.19bn, and ¥15bn. Using the latest market exchange rates €1 to $1.1381 and ¥1 to $0.0068, the euro component converts to approximately $2.5bn while the Japanese yen translates to $102m. In total, the new loans amount to an estimated $24.14bn. When converted at the official rate of N1,583.7388 to the dollar, the naira equivalent of these loans comes to N38.24tn.
Foreign portfolio investment into Nigeria’s equities market fell sharply by 92.39% in April 2025, as inflows dropped to N26.64 billion, compared to N349.97 billion recorded in March. The significant decline, driven largely by the absence of block trades that boosted March activity, comes amid continued global uncertainty and growing caution among international investors. According to data from the Nigerian Exchange (NGX), total foreign transactions also plummeted by 90.99%, from N699.89 billion in March to N63.07 billion in April.
Nigeria’s fulfilment of foreign trade transactions through Letters of Credit rose by 3.68% y/y to $267.96mn in the first four months of 2025, up from $258.46m in the corresponding period of 2024. Though the four-month total marks a slight annual increase, the month-on-month trend reveals volatility. February saw a 48.00% increase from January, followed by a 54.40% decline in March. The figure rose again in April by 47.70%.
Nigeria’s broad money supply rose to a record N119.11tn in Apr-2025, reflecting one of the sharpest monthly expansions in recent quarters, according to data from the Central Bank of Nigeria. The figure represents a 22.90% increase from N96.97tn recorded in Apr-2024 and a 4.30% rise from N114.22tn in March 2025. The rise in money supply comes amid the CBN’s decision to maintain a tight monetary policy stance, with the Monetary Policy Committee leaving the Monetary Policy Rate unchanged at 27.50% in its May 2025 meeting, pausing a string of rate hikes for the second time this year.
President Bola Ahmed Tinubu has signed a new Executive Order aimed at reducing project costs, boosting investment, and increasing revenue in Nigeria’s oil and gas sector. The Upstream Petroleum Operations Cost Efficiency Incentives Order (2025) introduces performance-based tax incentives for upstream operators that achieve verifiable cost savings aligned with defined industry benchmarks. These benchmarks based on terrain types such as onshore, shallow water, and deep offshore will be published annually by the Nigerian Upstream Petroleum Regulatory Commission (NUPRC).
This week, we expect the National Bureau of Statistics to release the Q1-2025 Rebased GDP Report.
Domestic Equities: The Bulls Regained Momentum…NGX-ASI Up by 2.49% w/w
Last week, the domestic equities market closed on a positive note as the bulls dominated the market. Notably, share price appreciation in AIRTELAF (+10.00% w/w) pulled the main index higher. Also worthy of mention are buy interests in BUAFOODS (+5.26% w/w), MTNN (+3.74% w/w), TRANSCOH (+6.50% w/w), ZENITHBA (+3.38% w/w) and OKOMUOIL (+8.33% w/w). As a result, the benchmark NGX-ASI improved by 249bps to close at 111,742.01 points, bringing the YTD return to a steady 8.56% and strengthening market capitalization to N70.46tn. In terms of trading, market activity was mixed as the average value of stocks traded climbed by 59.63% to print at N23.88bn. Meanwhile, the total volume of stocks traded fell by 3.51% to print at 758.72mn units, respectively. Market breadth was positive as investors’ sentiments remained at 1.27x (previously, 1.27x), 56 stocks appreciated while 44 depreciated.
Meanwhile, on a sectorial level, performance was Bullish as Four (4) out of the Five (5) sectors under our coverage closed in the green territory. The Consumer Goods sector (+3.78% w/w) led the gainers due to buy-interests in BUAFOODS (+5.26% w/w) and NB (+5.56% w/w). Following was the Insurance sector (+1.02% w/w) on the back of share price appreciation in MANSARD (+5.17% w/w) and SUNUASSU (+10.20% w/w). The Banking sector (+0.66% w/w) followed on the back of gains in ZENITHBA (+3.38% w/w) and ETI (+6.95% w/w). The Industrial Goods sector (+0.35%) followed owing to share price appreciation in WAPCO (+3.46% w/w) and CUTIX (+7.89% w/w). On the other side of the coin, the Oil and Gas sector (-3.44% w/w) was the sole laggard on the back of share price depreciation in SEPLAT (-10.00% w/w) and CONOIL (-9.99% w/w).
Looking forward, the equities market might be mildly positive leading to a slight gain in the ASI. This is hinged on the market benefiting from the spillover effect of excess liquidity in the financial system. Similarly, investors might start positioning for Q2-earning season in June, favoring corporates with FX gains, cost control, clear growth trajectory, and those with potentials for quality interim dividend payment. On the flip side, NT-Bills auction and potential OMO auction might reduce the inflow of funds into the equities market as elevated OMO and NT-Bill yields (~24%) keep investors anchored in money market instruments. Similarly, positive sentiments will be moderated by elevated inflation, heightened interest rate, weak Naira and general uncertainty in the global and domestic macroeconomic space. We expect retail investors to continue to take profit from previous week’s gains, tactically slowing the upward movement of the equities market. We advise investors to cherry pick fundamentally sound stocks with potential for interim dividend payment.
Money Market: System Liquidity Remains Elevated
Last week, the financial system opened with a surplus balance of N2.3tn. During the week, there was an inflow of N984.22bn worth of OMO maturities, which bolstered the financial system. Additionally, system liquidity was reflated due to increased activities in the Standing Deposit Facility (SDF). Nevertheless, the Apex Bank was active in the primary market (OMO and bond auctions) in an effort to mop up excess liquidity. However, given the weak demand at these auctions, it was insufficient to significantly drain liquidity. That said, the financial system closed the week with a surplus balance of N1.90tn. The average Open Repo Rate (OPR) added 2bps w/w from 26.48% to settle at 26.50%, while the Overnight Rate (OVN) declined by 100bps w/w from 26.94% to 26.89%.
The Central Bank of Nigeria (CBN) conducted an OMO auction with an offer size of N600.00bn across the 104-day and 139-day bills. At the auction, investors’ demand was subdued, as total subscriptions printed just at N687.13bn, indicating a mild oversubscription rate of 1.15x. The bids were majorly skewed towards the longer-tenured instrument, “139-day bill” which received total bids of N602.13bn. Notably, the Apex Bank undersold the auction, allotting a total of N482.33bn. That said, the stop rate on the 104-day and 139-day bills settled at 23.60% and 24.98%, respectively.
In the secondary NT-bills market, we observed bullish sentiments supported by the dovish outlook for the yield environment. As a result, the average yield on NT bills declined by 5bps w/w to close at 20.74% (previously, 20.79%). Similarly, the average yield on OMO bills fell by 37bps w/w to settle at 25.70% (previously, 26.51%).
This week, we expect the Central Bank to conduct an NT-bill auction across the 91-day, 182-day, and 364-day bills. At the auction, we expect strong investor demand, given the excess system liquidity. Thus, we expect stop rates at the auction to decline. In terms of liquidity, we expect a total inflow of N239.15bn from OMO maturities to hit the financial system. However, the CBN is set to mop up this liquidity with an OMO auction (with an offer size of N600.00bn) scheduled for Monday, 02 June 2025. In the secondary market, we expect bullish sentiments to be sustained, supported by the downward pressure on rates in the fixed-income market.
Bond Market: Marginal Rate Tapered at the Auction
The Debt Management Office (DMO) conducted the May 2025 bond auction with an offer size of N300.0bn across the reopened 2029 (“5-YR”) and 2033 (“9-YR”) bond papers. Investor demand was moderately strong, with total subscriptions amounting to N436.41bn, indicating an oversubscription of 1.45x. Demand was largely skewed toward the longer-dated 2033 instrument, which attracted bids totaling N419.96bn. Notably, the DMO slightly over-allotted the auction, selling N300.69bn worth of bonds. That said, the marginal rates on the 2029 and 2033 papers declined from 19.00% and 19.99% to print at 18.98% and 19.85%, respectively.
The secondary bond market was relatively bullish, as investors looked to fill their unmet bids from the Primary Market Auction (PMA). Thus, the average bond yield fell by 15bps to settle at 18.84% (previously, 18.99%). Similarly, activities were mainly bullish in the corporate bonds market, as the average yield on corporate bonds decreased by 10bps to settle at 21.90% (previously, 21.90%).
In the Nigerian secondary Eurobonds, bullish sentiments continued. Investors’ demand remained steady as global market conditions showed signs of stabilisation and Fitch upgraded the country’s credit rating. Buyers focused on select maturities, contributing to a moderate drop in yields. Consequently, the average yields in the market declined by 10bps w/w to settle at 9.56% (previously 9.76%).
Looking forward, the Nigerian fixed income market is poised for a cautious yet optimistic start to June 2025. Recent weak demand at the May FGN bond auction, particularly for the 5-year bond, signals investors’ preference for higher-yielding instruments amid the downward trend of rates in the fixed-income market. Thus, we expect bullish sentiments to persist in the secondary market, as investors look to take advantage of the current yields given the relatively stable monetary policy environment. Meanwhile, we expect the recent positive improvements in the global market to continue to drive bullish sentiments amongst investors in the Nigerian Eurobonds market. While the overall outlook is cautiously positive, global oil prices, major economies’ monetary policies, and domestic economic data will be key drivers of market sentiment in the week ahead.
Currency Market: Naira depreciated at the Official Market
Last week, the Naira depreciated by 36bps w/w at the official market to close at N1,586.15/$, from its previous close of N1,580.44$. Similarly, the Naira depreciated by 62bps at the parallel market to settle at N1,620.00/$ from its previous close of N1,610.00/$. Lastly, Nigeria’s external reserves fell by 24bps to settle at $38.467bn (previously, $38.561bn).
This week, we expect the Naira to hover at current levels if there are no substantial shocks. We anticipate the CBN to continue to defend the Naira in the Foreign Exchange Market. Ultimately, CBN’s intervention would sustain the Naira at current levels with a possibility of marginal gains. However, we foresee that speculation, hoarding, insufficient supply of FX, high demand for FX, weak capital inflows, capital flight and low foreign investment, debt service pressure, weak FX earnings, corruption and negative real returns would continue to weaken the Naira in the FX market.
