Global Markets

The narrative has shifted over the past three months as talk of recession has been replaced by that of a soft landing for the world economy. Inflation has started to decline while growth is proving to be resilient. In marked contrast to 2022, expectations for global growth are rising while those for inflation have stabilized after rising sharply last year. Nowhere is this more apparent than in the US where headline inflation fell, while unemployment remains close to record lows. Forecasts of a recession have been pushed out, or quietly dropped altogether as the economy strengthened in Q3 2023. In response, risk assets have performed well with global equity markets rising. However, government bond yields have also risen as markets have factored in a higher profile for real interest rates.

Domestic Economy

Despite improved economic activities post-suspension of the Naira redesign policy which slowed down economic activities in Q1 2023, the GDP for Q2 2023 as published by National Bureau of Statistics (NBS)  grew by 2.51% year-on-year in real terms. This denotes a 1.03% decline from the growth rate of 3.54% recorded in Q2 2022, and a marginal 0.20% increase from 2.31% reported in Q1 2023.


Inflationary pressures heightened in Q3 2023, as Headline Inflation stood at 26.72% in September 2023 readings from 21.34% in December 2022. The inflationary drivers were higher energy costs, exchange rate crisis, sustained legacy issues and supply chain disruptions. Food Inflation rose to 30.64% in September 2023 (December 2022: 23.75%) while Core Inflation rose to 21.84% in September 2023 (December 2022: 18.49%).

Fixed Income Market

In line with previous quarter, the yield in the Nigerian Treasury Bills remained relatively low in comparison to Monetary Policy Rate (18.75%). However, the yield on the 364-day bill was slightly higher than Q2 2023. For context, the average yield in Q3 2023 in the 364-day bill rose to 11.80% from 10.37% in Q2 2023. This signifies lower interbank liquidity levels during the period.

Equities market

The equities market sustained its remarkable positive performance into the third quarter as the All-Share Index returned +8.88%, following a +5.82% return in Q1 2023 and +12.42% return in Q2 2023 respectively. The performance was on the back of sustained investor’s confidence which was accompanied by various reforms by the new administration despite concerns about stubbornly high inflation and the apprehension surrounding the fallout of the 2023 general elections.


We maintain that GDP growth will sustain a languid pace throughout the year. This expectation is premised on the full impact of FX harmonization, subsidy removal and other reforms that may squeeze household demands, increase firm cost of operation and low investment from the new administration and private sector.  Taking these considerations into account, we revised our FY 2023 GDP growth forecast to 2.70% (previous: 2.72%).

Fixed Income Market

The prevailing influence on yields is anticipated to be determined by several factors including system liquidity. On the supply end, inflows from bond coupon payments, and FAAC allocation are anticipated to bolster system liquidity.

Foreign Exchange

The demand pressure in the foreign exchange market is expected to persist till the rest of the year, while dollar supply will likely remain weak due to underlying constraints including subsidy outflows, weak diaspora remittances, and weak foreign inflows. Furthermore, with the restriction lifted on the 43 items by CBN, we expect more pressure in the I & E window.

Please follow the link “Challenges on the Road to Soft Landing” to view the report.

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