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Nigerian Equities Show Resilience as Inflation Cools to 24.48%, PMI Signals Growth. Financials drag on NGX All-Share Index, but Zenith Bank and macro improvements offer cautious optimism.
The Nigerian equities market sustained cautious stability this week, with the NGX All-Share Index edging up 0.12% to hold above the critical 106,000-point threshold. While macroeconomic improvements – including a sharp decline in inflation to 24.48% (January 2025) and a rebound in the Purchasing Managers’ Index (PMI) to 53.7 – signal a potential turning point, sectoral divergences and global trade risks underscore investor hesitancy.
Market Performance Breakdown
- Financial Sector Drag: GTCO (-1.79%), UBA (-0.68%), and FBN Holdings (-0.35%) offset gains by Zenith Bank (+0.52%).
- Stalled Blue-Chips: Flat closes for Dangote Cement (₦645/share) and BUA Foods (₦220/share) reflected muted institutional activity.
- Bright Spots: Consumer goods and telecom sectors edged up 0.3% and 0.2%, respectively, buoyed by Nestlé Nigeria (+1.1%) and Airtel Africa (+0.8%).
Macroeconomic Shifts
- Inflation Relief: Consumer prices rose 24.48% YoY in January, down from December’s 34.8% – the steepest single-month drop since 2021. Analysts attribute this to harvest-season food price moderation and CBN rate hikes (now 22.75%).
- PMI Growth: February’s PMI hit 53.7 (above 50 = expansion), driven by manufacturing output and new orders. However, employment sub-index lagged at 48.2, reflecting persistent cost pressures.
Global Risks & Local Caution
- U.S.-China Trade Tensions: Proposed EU-style tariffs on Chinese EVs and steel threaten to disrupt Nigeria’s import-dependent supply chains, particularly for machinery and raw materials.
- Currency Pressures: The naira traded at ₦1,540/$1 at the official window, with parallel rates at ₦1,620 amid FX liquidity concerns.
“PMI growth signals underlying resilience, but sectors like health tech face margin squeezes from high energy costs. Zenith’s gain reflects its robust FX liquidity position,” says Nneka Ogwuji, Renaissance Capital.
Analyst Insights
“The inflation cooldown is a green shoot, but sustainability hinges on fiscal reforms and exchange rate stability. Investors are sidelined until post-election clarity emerges” – Adedayo Bakare, Chief Economist at Cordros Capital.
Strategic Takeaways
- Short-Term: Range-bound trading likely until Q1 earnings and policy roadmap post-2025 elections.
- Long-Term: Sustained inflation control could reignite foreign inflows into banking and consumer stocks.
- Risks: Escalating global protectionism and naira volatility remain key headwinds.
Data Snapshot
- FX Reserves: $35.1B (up 2.1% MoM) – highest since August 2023.
- Bond Yields: 10-year FG bond yields fell to 18.2%, reflecting inflation optimism
