Global Macroeconomic Review

United States: The U.S. economy displayed resilience in September with robust job gains, as non-farm payroll employment surged by 254,000, significantly surpassing projections. This strong labor market performance brought the unemployment rate down to 4.1%, reflecting continued economic health despite pressures from inflation. However, while core inflation held at a higher-than-expected rate of 3.3% annually, the broader Consumer Price Index (CPI) rose moderately due to increased shelter and food prices. The Producer Price Index (PPI) also saw unexpected stability, with price gains in services offsetting declining goods prices, indicating a mixed inflation outlook…

United Kingdom: The UK economy returned to growth, registering a 0.2% rise in GDP in the month of September, yet concerns about an economic slowdown persist as inflation remains high and manufacturing and services sectors weaken. Both sectors reported declining PMIs, with services showing a multi-month low, which has sparked further pressure on the Bank of England to consider rate cuts. In line with this, the UK’s long-term growth prospects face challenges due to inflationary constraints and weakened domestic demand…

Domestic Macroeconomic Review

Uptick in Inflation; Decline in Capital flows; Rising Debt levels; Crude support to Dangote

Nigeria’s inflation surged to 32.70% y/y in September 2024, reversing a short-lived downtrend due to petrol price hikes. Food inflation hit 37.77%, driven by increases in essential goods. This inflation spike, partially due to subsidy reforms, has raised challenges for the Central Bank of Nigeria (CBN). Proactive measures, including potential rate adjustments, aim to ease inflationary pressures, although the bank may adopt a more accommodative stance by early 2025. Additionally, the National Economic Council urged a delay in the proposed tax reform bill to incorporate broader stakeholder input, with northern states voicing concerns over VAT distribution policies that they argue could disproportionately affect the region….

Market Update

Foreign Exchange Market: In October, the Nigerian Autonomous Foreign Exchange Market (NAFEM) saw improved dollar liquidity, with the naira trading between ₦1,540 and ₦1,697/USD. The Central Bank of Nigeria (CBN) intervened with an estimated $383 million to stabilize rates, though the naira depreciated overall, closing at ₦1,675.49/USD—a monthly drop of 8.66%. Similarly, the parallel market saw a ₦50 drop, reaching ₦1,750/USD…

Money Market: October saw persistent illiquidity in Nigeria’s interbank market, primarily driven by CBN’s FX interventions, CRR debits, and frequent OMO auction settlements. The month began with a significant credit of ₦709.32 billion, but liquidity sharply declined throughout the period, averaging a debit of -₦579.71 billion, down from -₦26.13 billion in September. FAAC disbursements, remita credits, and other state inflows temporarily eased liquidity pressures in mid-October, with interbank rates reaching a low of 19%-25% by month-end. However, funding pressures remained high, with rates spiking up to 34% during peak OMO settlements and closing around 26%-27% after FAAC inflows…