Nigeria’s financial markets are entering a period of mixed expectations as stronger external reserves and improving business activity provide support to economic confidence, while declining foreign exchange inflows and cautious investor sentiment present continuing challenges.
The latest weekly market review highlighted contrasting developments across the economy.
The Central Bank of Nigeria’s composite Purchasing Managers’ Index rose to 53.0 points in September, signalling continued business expansion.
At the same time, total foreign exchange inflows declined by 23.3 per cent to $5.12 billion.
Nigeria’s gross external reserves increased to $55.07 billion, while the naira recorded a marginal appreciation in the official market.
However, the Nigerian Exchange All-Share Index declined by 1.0 per cent during the review week, reflecting selling pressure in major listed companies.
These developments suggest that economic activity is improving in some areas even as financial markets remain sensitive to liquidity and investment conditions.
Business Activity Offers Positive Signal
The rise in the composite PMI indicates continued expansion across industry, services and agriculture.
Industrial activity recorded the strongest improvement, supported by better output and new orders.
Services and agriculture also remained in expansion, although their PMI readings moderated slightly.
The figures provide some evidence of resilience in business activity.
However, companies continue to face operating cost pressures that may affect investment and employment decisions.
FX Inflows Raise Concerns
The decline in foreign exchange inflows represents a significant development for Nigeria’s external sector.
Domestic inflows fell to $2.06 billion, while foreign sources contributed $3.06 billion.
Reduced foreign portfolio investment and foreign direct investment were among the factors contributing to the decline.
If sustained, weaker inflows could reduce the availability of foreign currency in the market.
Nevertheless, exchange rate outcomes will also depend on foreign currency demand, reserve levels and central bank operations.
Naira Receives Support from Reserves
The naira strengthened marginally to ₦1,331.56 per dollar during the review week.
The improvement was supported by a reported $300 million central bank intervention.
External reserves also increased by $140.41 million.
These developments may support near-term confidence in the foreign exchange market.
However, weaker forward rates suggest that investors remain cautious about longer-term currency risks.
Equity Investors Await Earnings
The domestic equities market recorded a weekly decline of 1.0 per cent.
Losses in Aradel Holdings, Fidelity Bank, Nestlé Nigeria and First HoldCo contributed to the negative performance.
Despite the setback, the market retained a year-to-date gain of 59.6 per cent.
Attention is expected to shift towards third-quarter corporate earnings.
Companies with stronger earnings prospects could attract selective buying interest.
Fixed-Income Market Reflects Liquidity Conditions
Treasury bills continued to attract significant demand, with subscriptions at the latest auction reaching ₦1.77 trillion.
The DMO allotted ₦968.47 billion.
However, the broader secondary Treasury bills market recorded an increase in average yields.
Government bond yields also rose, reflecting profit-taking and cautious investor positioning.
The movements demonstrate how investor demand, liquidity and interest rate expectations can influence different segments of the fixed-income market.
Global Risks Could Influence Nigeria
International developments remain important to Nigeria’s economic outlook.
Higher oil prices can affect export revenue while also increasing some domestic operating costs.
Global interest rates influence the attractiveness of emerging-market financial assets.
Geopolitical tensions can also affect investment flows and international trade.
These external factors may influence Nigeria’s exchange rate, borrowing costs and investor sentiment.
Market Outlook Remains Selective
The supplied review anticipates continued business expansion, supported by stronger new orders and seasonal agricultural activity.
Money market liquidity could also benefit from expected OMO maturities.
However, foreign exchange inflows, inflationary pressures and global financing conditions remain important risks.
For investors and businesses, the coming period will require close attention to corporate earnings, monetary policy and foreign exchange developments.
The latest figures present an economy showing signs of resilience, but still facing important challenges involving investment flows, borrowing costs and financial market stability.
