The domestic stock market extended its bearish run this week, closing lower in four of the five trading sessions. Sustained sell pressures across bellwether names, including FIRSTHOLDCO (-7.2%), STANBIC (-3.2%), ARADEL (-14.9%) and GTCO (-7.0%), drove the All-Share Index lower by 1.4% w/w to 239,351.16 points.
August 21, 2026/Codros Report
Global
According to the United States Department of Labor, initial jobless claims declined by 6,000 to 206,000 in the week ended August 15, below market expectations of 210,000. The latest reading extended the recent period of subdued initial claims and low-job loss environment following the near 60-year low of 189,000 recorded in mid-July. On a non-seasonally adjusted basis, the largest declines were recorded in Michigan (-2,408), South Carolina (-1,227) and California (-1,202), while the largest increases occurred in Kentucky (+527), Ohio (+324) and Alaska (+126). Meanwhile, the four-week moving average, which smooths weekly volatility, increased by 4,250 to 204,000 from 199,750 in the prior week. Looking ahead, we expect initial jobless claims to remain relatively low, supported by limited layoffs and continued labour market resilience. However, the recent increase in the four-week moving average hints at a mild loss of momentum, rather than deteriorating sharply.
According to the Office for National Statistics (ONS), UK headline inflation rose to 2.9% y/y in July, up from 2.6% y/y in June, which was a 15-month low, and in line with market expectations. The increase largely reflected higher energy prices, despite softer food and services inflation. More specifically, the UK’s energy regulator, Ofgem, increased the energy price cap by 13.0% for the July-September 2026 period, raising the annual cap for a typical household under the previous consumption assumptions by c.+GBP221.00/annual household bill to GBP1,862.00. However, food inflation eased to 1.3% y/y from 1.7% y/y in June, suggesting that competitive pricing among supermarkets may have helped limit the pass-through of higher input costs. The moderation was primarily driven by lower prices for meat, breaded chicken, sugar, jam, honey, syrups, chocolate and confectionery. At the same time, services inflation, a gauge of domestically generated price pressures, moderated to 3.4% y/y from 3.6% y/y in June. The decline was driven by lower transport costs, which more than offset higher price for clothing & footwear and furniture & household goods. Core inflation, which excludes energy, food, alcohol and tobacco, was unchanged at 2.6% y/y in July (June: +2.6% y/y), suggesting that underlying price pressures remain broadly contained. On a month-on-month basis, consumer prices rose by 0.3% in July (June: +0.1% m/m), reflecting higher energy costs. Looking ahead, the UK’s inflation outlook remains tilted to the upside, as elevated wholesale energy prices could sustain pressure on household energy costs. The risk of further increases in energy price cap could also generate second order effects on food and core inflation. Against this backdrop, we expect the Bank of England to keep Bank rate unchanged at its next meeting, provided services inflation remains broadly contained. However, a renewed energy driven uptick in inflation, particularly if accompanied by a sustained rise in core inflation, could increase the likelihood of a rate hike.
Global Market
Global equities traded on a broadly negative note this week, as elevated oil prices and rising global bond yields weighed on sentiments. During the week, brent crude climbed above USD93.00/bbl amid renewed US-Iran tensions, tighter sanctions and concerns over supply disruptions through the Strait of Hormuz, while bond yields rose on persistent inflation and mounting fiscal concerns across major economies. At the time of writing, major US indices (DJIA: -1.5%; S&P 500: -1.5%; NASDAQ: -2.5%) were poised to close lower, pressured by losses in semiconductor tickers including NVDA, MU, SNDK and WDC, as higher yields weighed on technology valuations. Meanwhile, European equities were mixed, as the STOXX Europe 600 (-1.0%) declined, weighed down by losses in technology tickers amid rising inflation, while the FTSE 100 (+0.1%) posted modest gains, supported by gains in mining and oil stocks. Elsewhere, Asian markets (SSE: -0.6%; Nikkei 225: -3.9%) closed lower. Japanese equities were pressured by accelerating inflation, which strengthened expectations of a potential BoJ rate hike in September, while Chinese equities tracked broader weakness on Wall Street. Finally, the Emerging and Frontier Markets (MSCI EM: +1.1%; MSCI FM: +0.9%) indices advanced, supported by gains in Brazil (+0.6%) and Romania (+1.1%), respectively.
Domestic Economy
According to the National Bureau of Statistics (NBS), headline inflation eased by 48bps to 15.43% y/y in July (June: 15.91% y/y), its lowest level since April 2026. The moderation was driven by a sharper decline in core inflation, which more than offset the acceleration in food inflation. Specifically, the food index accelerated by 279bps to 20.31% y/y (June: 17.52% y/y), reflecting persistent price pressures during the peak of the lean season, depleted food stocks, insecurity in key food-producing areas, and elevated logistics costs. At the same time, core inflation moderated by 95bps to 14.97% y/y (June: 15.92% y/y), reflecting softer price pressures in housing, water, clothing & footwear, and recreation, sport & culture. On a month-on-month basis, headline inflation slowed for the fourth consecutive month to 1.57% (June: 1.66% m/m), primarily reflecting softer energy prices and a broadly stable exchange rate, which helped contain imported inflationary pressures. Looking ahead, we expect price pressures to ease slightly in August, supported by a firmer naira, alongside improved seasonal food supply support following the onset of the green harvest. Accordingly, we forecast monthly inflation to ease to 0.69% in August (July: 1.57%), which would lower the annual inflation rate marginally to 15.39% y/y (July: 15.43% y/y).
The Federation Accounts Allocation Committee (FAAC) disbursement to the three tiers of government rose by 17.9% m/m to NGN3.01 trillion in August (July: NGN2.55 trillion), based on July revenue. Notably, the allocation represents the highest monthly FAAC disbursement in 2026 and the largest allocation since January 2019. The outturn was driven by stronger collections from Petroleum Profit Tax (PPT)/ Hydrocarbon Tax (HT), Companies Income Tax (CIT), Capital Gains Tax (CGT), Stamp Duty Tax, petroleum and mineral royalties, excise duty and gas flared penalties. These gains more than offset declines in Value Added Tax (VAT), Import Duty, Common External Tariff (CET) receipts, gas flared related fees and miscellaneous oil revenue. We estimate that the amount disbursed represents 69.0% of the NGN4.36 trillion in gross revenue generated in July, with the balance attributable to transfers, interventions, refunds and cost of collection. Based on the stipulated revenue-sharing formula, the Federal Government (FGN) received NGN1.15 trillion (July: NGN923.44 billion), state governments received NGN943.35 billion (July: NGN838.21 billion), local governments received NGN673.65 billion (July: NGN591.39 billion). Meanwhile, oil-producing states received an additional NGN243.48 billion (July: NGN197.61 billion) as derivation revenue (13.0% of mineral revenue). In the near term, we expect potential revenue gains from two key sources, (1) higher oil revenues, supported by increased domestic production and elevated crude oil prices, and (2) stronger CIT collections, underpinned by improved economic activity and collection efficiency. However, local currency appreciation could reduce the naira value of dollar-denominated revenues when converted, thereby limiting the pace of FAAC growth.
Capital Markets
Equities
The domestic stock market extended its bearish run this week, closing lower in four of the five trading sessions. Sustained sell pressures across bellwether names, including FIRSTHOLDCO (-7.2%), STANBIC (-3.2%), ARADEL (-14.9%) and GTCO (-7.0%), drove the All-Share Index lower by 1.4% w/w to 239,351.16 points. Consequently, the month-to-date and year-to-date returns settled at -2.4% and +53.8%, respectively. On market activity, trading volume and value declined by 48.3% w/w and 4.0% w/w, respectively. On sectors, the Oil & Gas (-5.3%), Insurance (-3.7%) and Banking (-2.9%) indices closed lower, while the Consumer Goods (+0.1%) index closed higher. The Industrial Goods index closed flat.
Looking ahead, we expect market sentiment to remain cautious in the absence of clear near-term catalysts. In addition, the CBN’s revised OMO framework could temper market participation, as attractive short-term fixed-income yields may continue to compete with equities for investor flows.
Money Market and Fixed Income
Money Market
The OVN rate contracted by 12bps w/w to 22.1% as inflows from OMO maturities (NGN2.22 trillion) offset Bond PMA debits (NGN805.16 billion). Nevertheless, average system liquidity moderated to a net long position of NGN3.95 trillion, down from NGN4.64 trillion in the previous week.
Barring significant liquidity mop-up activities by the CBN, we expect system liquidity to remain robust in the coming week, supported primarily by OMO maturities (NGN2.32 trillion). Given the incoming liquidity and the potential for a significant surplus, the CBN may intensify liquidity management operations through additional OMO issuances. Overall, we expect money market rates to remain around current levels, however, the magnitude and timing of any sterilization exercise could drive a deviation.
Treasury Bills
The Treasury bills secondary market traded on a bullish note as the average yield across all instruments contracted by 12bps to 19.2%. By segment, average NTB secondary-market yields rose 3bps to 18.6%, as investors unwound positions and redirected flows into the OMO secondary market. In contrast, average OMO secondary-market yields declined 40bps to 20.8%, as investors redirected maturing OMO proceeds into the secondary market amid the absence of fresh OMO supply.
Next week, we expect the Treasury bills secondary market to maintain a bullish bias, supported by resilient domestic demand and ample system liquidity. However, yield movements may remain choppy with intermittent upward pressure as investors trim NTB positions to rotate into the OMO secondary market, potentially exerting downward pressure on OMO yields. On the supply side, the DMO is scheduled to offer NGN700.00 billion in Treasury bills at its primary auction on Wednesday, 26 August.
Bonds
The FGN bond secondary market traded on a bullish note, as the average yield across instruments contracted by 17bps to 16.8% due to strong local demand. Across the benchmark curve, the average yield contracted at the short (-35bps), mid (-17bps) and long (-7bps) segments due to the demand for the MAR-2027 (-199bps), JAN-2035 (-39bps) and APR-2037 (-40bps) bonds, respectively. On Monday, the DMO reopened the JAN-2035, APR-2037 and JUN-2038 bonds, offering a total of NGN1.10 trillion. Total demand settled at NGN1.73 trillion, with the DMO eventually allotting NGN805.16 billion. The stop rates on the JAN-2035, APR-2037 and JUN 2038 bonds, which were on-the-run at the previous auction, contracted by 119bps, 116bps and 61bps to settle at 17.15%, 17.19% and 17.79%, respectively.
Over the medium term, we expect yields to remain elevated, reflecting the government’s sizeable borrowing requirements, although improving offshore and local demand should provide some support in the near term.
Foreign Exchange
The naira appreciated by 0.8% w/w to NGN1,346.99/USD buoyed by robust supply. Meanwhile, gross external reserves increased by USD335.20 million to USD52.66 billion (19 August 2026). In the forwards market, the naira appreciated across the 1-month (+0.8% to NGN1,369.71USD), 3-month (+0.8% to NGN1,406.77/USD), 6-month (+0.8% to NGN1,460.09/USD) and 1-year (+0.8% to NGN1,566.57/USD) contracts.
We expect the naira to trade within a broadly stable range around its current level in the near term, underpinned by resilient portfolio inflows, firm investor sentiment and a widening current account surplus. A renewed decline in oil-related FX inflows remains the main downside risk to this outlook