Q4 2024: MACROECONOMIC AND FINANCIAL MARKET REVIEW

Global Macroeconomic Review

In the fourth quarter of 2024, the global economy was characterized by a cautious stance from central banks, with several signalling potential rate cuts in response to moderating inflation and mixed economic indicators. The Federal Reserve implemented its third consecutive interest rate cut of the year, reducing the bench mark rate by 0.25 percentage points amid cooling inflation.

Similarly, the European Central Bank (ECB) lowered its key interest rates by 25 basis points, marking the fourth reduction in 2024, as inflation approached the 2% target.

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Global Growth Outlook‍

Global growth has witnessed a slow down with a decline from 2.6% in 2023 to 2.1% in 2024. Developed markets, particularly the U.S. and Eurozone, were expected to lead this deceleration, while emerging markets were relatively maintained stable growth rates.

GeopoliticalUncertainties

The global geopoliticallandscape remained in a state of limbo, with ongoing tensions such as theUkraine conflict and U.S.-China relations persisting without significantresolution. These uncertainties continued to pose risks to global economicstability.

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Investment Strategies Amid Volatility

Analysts advised cautionin investment strategies for 2025, highlighting potential market volatility due to unpredictable policy shifts and economic indicators. Recommendations included diversifying portfolios to mitigate risks.

Domestic Macros

Nigeria’s Domestic Macro Trends: Q4 2024

The fourth quarter of 2024 marked a period of significant developments in Nigeria’s domestic macro economicl and scape. Amid a challenging global environment and domestic structural hurdles, key indicators highlighted a mixed but cautiously optimistic economic trajectory.

Economic Growth

Nigeria’s GDP growth in Q3 2024 stood at 3.2% year-on-year, reflecting a slight recovery from earlier quarters.nThe non-oil sector, particularly technology, agriculture, and services, drove this growth, contributing over 85% of total GDP. However, the oil sector saw modest gains, with production levels increasing from 1.54 million barrels per day (Mbd) in October to 1.69 Mbd in November, before settling back to 1.54 Mbd in December. This increase came despite persistent challenges such as oil theft and aging infrastructure.

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Inflation

Inflationary pressures intensified through Q4 2024, with headline inflation rising from 32.7% in September to 34.6% in November. Core inflation followed a similar trend, increasing from 27.43% in September to 28.75% in November, while food inflation peaked at 39.93% during the same period.

The continued rise in food prices and transportation costs were primary drivers of these increases, exacerbated by the lingering effects of fuel subsidy removal.

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Exchange Rate andMonetary Policy

Exchange rate dynamics reflected continued volatility. The NAFEX rate peaked at NGN 1670.47/USD in October before declining to NGN 1635/USD in December. Meanwhile, the parallel market rate showedsignificant

divergence, starting at NGN1680/USD in September and dropping sharply to NGN 1549/USD by December. This unexpected narrowing of the gap between official and parallel rates signaled improved foreign exchange liquidity towards year-end.

Monetary policy remained restrictive, with the Central Bank of Nigeria (CBN) raising the Monetary Policy Rate (MPR) from 27.25% in September to 27.50% in November to combat persistent inflation.

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FiscalPolicy and Public Finance

A notable development in Q4 was the presentation of the NGN47.9 trillion 2025 national budget to the National Assembly, the largest in Nigeria’s history. The budget prioritized infrastructure development, healthcare, and education while also allocating funds for debt servicing, which continues to weigh heavily on public finances. Allocation highlights included NGN 4.9 trillion for defense and security, NGN4.06 trillion for infrastructure, NGN 2.48 trillion for health, NGN 3.52trillion for education, and NGN 16.33 trillion for debt servicing. Despite the ambitious fiscal framework, the government faces constraints in expanding revenue streams, with debt servicing consuming a substantial portion of earnings.

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‍FINANCIAL MARKET REVIEW

Domestic FinancialMarkets Review

Equities Market-

The equities market in Nigeria showcased remarkable performance in 2024, with major indices posting significant year-to-date (YTD) gains as of Q4. The NGX All Share Index (ASI) recorded a robust YTD return of 37.7%, underscoring broad-based investor confidence and sustained market strength. Outperforming the ASI, the NGX Pension Index(Pen) achieved an 39.5% YTD return, reflecting heightened interest in stable, pension-compliant stocks.

The NGX Pension Broad Index (PenBroad) delivered the highest YTD return at 39.6%, driven by a broader array of equities appealing to institutional investors. These gains highlight the strong appetite for equities amid a relatively stable macroeconomic environment.        

Quarterly performance in Q4 2024 further highlights the dynamics of investor behaviour. While the NGX ASI posted a modest quarterly gain of 4.5%, the NGX Pension Index surged by 13.3%, demonstrating a concentrated push toward quality stocks with consistent returns.

The NGX Pension Broad Index also performed solidly, with a 6.3% quarterly return, reflecting the benefits of diversification within a

pension-compliant framework. These results suggest that institutional investors, particularly pension funds,played a pivotal role in sustaining market momentum, even as individual investors engaged in selective portfolio rebalancing. Overall, the Nigerian equities market remains resilient and poised for further growth, supported by favourable macroeconomic conditions and corporate earnings strength.

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The sectoral returns of the Nigerian equities market in Q4 2024 highlight varied performances across industries. The Insurance Index led the pack with an impressive 107.64% YTD return, fuelled by strong QTD (55.35%) and MTD (36.89%) gains, reflecting heightened investor confidence in the sector. The Oil and Gas Index followed with a remarkable 159.81% YTD return, although it experienced a slight decline in December, posting -3.21% MTD.

The Consumer Goods Index also performed well, delivering a solid 52.20% YTD return, supported by 9.11% QTD and 7.11% MTD growth. The Pension Index achieved a 39.06% YTD return, with steady gains of 12.31% QTD and 5.61% MTD, driven by the stability of pension-compliant stocks. Meanwhile, the Banking Index and Industrial Goods Index recorded more moderate performances, with 21.80% and 31.47% YTD returns, respectively, reflecting their resilience in a dynamic market environment. These sectoral returns underscore the diverse growth opportunities in Nigeria's equities market

BondMarket:  StrongInvestor Demand Despite Lower Subscription Levels

The Debt Management Office (DMO) successfully raised N211.15 billion through the reopening of two Federal Government of Nigeria (FGN) bonds: the 19.30% FGN APR 2029 and the 18.50% FGN FEB 2031. While the total subscription level decreased from the previous auction, the DMO still received bids exceeding the offered amount, indicating continued investor interest in Nigerian government securities. The lower subscription level compared to the previous auction may be attributed to various factors, including market sentiment and investor appetite. However, the strong bid-to-offer ratio demonstrates the continued confidence of investors in the Nigerian economy and the stability of its debt market.

Treasury Bills Market:  FAAC Inflows Offered Relief, ButNTB Market Remains Quiet

Following the recent Nigerian Treasury Bill (NTB) and bond auctions, interbank liquidity tightened, leading to increased offer of bills across the curve and subdued demand. While the partial Federal Accounts Allocation Committee (FAAC) inflows alleviated this pressure, the market remained relatively quiet due to the festive season.

Money Market-   Record SLF Borrowing Signals BankLiquidity Strain

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The Central Bank of Nigeria's (CBN) economicreport reveals a significant increase in Nigerian banks' reliance on the Standing Lending Facility (SLF). In the third quarter of 2024, banks borrowed arecord ₦27.95 trillion

through the SLF, up from ₦26.44 trillion in the previous quarter. This surge underscores intensifying liquidity pressures within the banking sector. While the daily average borrowing dipped slightly from ₦0.51 trillion in Q2 to ₦0.43 trillionin Q3, the overall trend highlights the increasing need for banks to access emergency funding from the central bank.