Macroeconomic Report & Economic Updates

In the week ending August 29, 2025, the Nigerian Exchange Group (NGX) reported that the NGX All-Share Index (ASI) depreciated by 0.50% to close at 140,295.50 points, while market capitalisation fell by 0.49% to ₦88.769 trillion. The decline reflects cautious investor sentiment amid persistent macroeconomic uncertainties, particularly inflationary pressures, interest rate adjustments, and foreign exchange volatility. All sectoral indices closed lower, except the NGX AFR Dividend Yield Index, which appreciated by 0.94%, signalling investors’ preference for dividend-paying stocks. Meanwhile, the NGX ASeM Index closed flat, reflecting limited activity in the segment. The market’s bearish trend highlights risk aversion among investors, even as bargain-hunting in undervalued equities provided intermittent support. Looking ahead, performance will be shaped by upcoming corporate earnings, policy directions from monetary authorities, and macroeconomic data releases. Sustained volatility is expected, although dividend-focused and defensive stocks may continue to attract investor interest. The bearish performance reflects cautious investor sentiment amid persistent inflation, interest rate adjustments, and exchange rate volatility, which continue to dampen risk appetite. The preference for dividend-yielding equities suggests that investors are shifting toward defensive strategies in search of stability. To restore confidence and deepen participation, policy interventions should prioritise stabilising the foreign exchange market, ensuring consistency in monetary policy, and strengthening investor protection frameworks. Clear fiscal and structural reforms are also critical in reducing market volatility and attracting long-term capital inflows. 

The Movement in Foreign Reserves data from the Central Bank of Nigeria (CBN) revealed that the country’s foreign reserves rose to $41 billion on August 19, 2025, the highest level in 44 months. This is the highest amount recorded since December 3, 2021, marking a significant increase from the $37 billion to $39 billion range within which reserves fluctuated during the second and third quarters of the year. In its 301st Monetary Policy Committee (MPC) communique, the CBN noted continued stability in the foreign exchange market, citing factors such as higher capital inflows, improved oil production, rising non-oil exports, and reduced imports. The recent surge in reserves can also be attributed to these factors. The recent boost in reserves strengthened the country’s economic buffer, relieving pressure on the Naira and helping to restore market confidence. Despite these gains, significant risks remain that could slow the growth of the foreign reserve, such as declining inflows and high debt servicing costs. To sustain this upward trend, it is essential to maintain manageable debt levels and further enhance oil production through infrastructural investment. Futhermore, boosting non oil exports is critical and can be achieved by improving business access to credit, affordable electricity, transportation networks, and ensuring the availability of raw materials for production. 

According to the National Bureau of Statistics (NBS) report, Nigeria recorded a total capital importation of US$5.64 billion in the first quarter of 2025. This marked a significant 67.12% increase compared to the US$3.38 billion recorded in Q1 2024 and a 10.86% rise from the US$5.09 billion recorded in Q4 2024. The surge reflects renewed investor confidence, largely driven by short-term inflows. Portfolio investment dominated capital importation, accounting for 92.25% of the total at US$5.20 billion. Other investment followed with US$311.17 million (5.52%), while foreign direct investment (FDI) remained low at just US$126.29 million (2.24%). This composition suggests that while Nigeria remains attractive for quick return capital, long-term investor confidence remains weak. The banking and financing sectors received the bulk of inflows, jointly accounting for over 92% of the total. Capital came predominantly from the United Kingdom, followed by South Africa and Mauritius. Abuja (FCT) and Lagos State were the top destinations, receiving over 99% of all inflows. Standard Chartered, Stanbic IBTC, and Citibank were the leading recipient banks. While rising portfolio flows were positive in the short term, Nigeria’s overreliance on them poses significant risks. To boost FDI, the government should prioritise regulatory stability, infrastructure development, real sector reforms, and expanded investor outreach. Diversifying capital sources and sectors is crucial for boosting long-term economic growth and employment. 

The Central Bank of Nigeria’s (CBN) Business Expectations Survey (BES) for June 2025 revealed sustained optimism among businesses across the country. The overall Confidence Index stood at 20.7 index points, indicating positive sentiments about the current macroeconomic environment. This upbeat outlook is projected to strengthen further, with index points reaching 23.0 in July, 34.9 in September, and 41.3 in December 2025. Sectoral responses suggest broad based optimism. The industry sector recorded the highest optimism in June 2025, with a confidence level of 23.1 index points. The confidence index is expected to rise significantly, with projections for the next six months reaching 48.3 for Industry and 42.8 for Agriculture. The Services sector also showed a promising trajectory, with optimism rising to 36.8 index points in the next six months. The Business Confidence Index (BCI) further highlighted sectoral optimism. The Construction sector led with the highest confidence index at 15.4 index points, followed by Manufacturing (13.1), Mining and Quarrying (12.5), Agriculture (11.4), Market Services (10.7), and Non-Market Services (7.6). Regionally, the outlook for the macroeconomy remains largely positive, which is favourable for the overall economy. However, to consolidate this growing confidence, consistent monetary and fiscal coordination is essential, particularly measures that address credit accessibility, interest rate concerns, and structural constraints that vary across regions.

The Office of the Accountant-General of the Federation reported that a total sum of ₦1.818 trillion, was shared among all three tiers of government. This amount was 9.58% higher than the ₦1.659 trillion distributed for May 2025. The allocation included ₦645.383 billion to the Federal Government, ₦607.417 billion to state governments, and ₦444.853 billion to local governments. Additionally, ₦162.786 billion was earmarked for collection costs, while ₦2.251 trillion was allocated for total transfers, interventions, refunds, and savings. The total distributable revenue comprised ₦1.018 trillion in statutory revenue and ₦631.507 billion from the distributable Value Added Tax (VAT). The gross revenue of ₦678.165 billion available from VAT in June 2025 was lower than the ₦742.820 billion available in May 2025. From the distributable VAT revenue, the Federal Government received ₦94.726 billion, the State Governments received ₦315.754 billion, and Local Government Councils received ₦221.027 billion. The Electronic Money Transfer Levy (EMTL), which contributed ₦29.165 billion, was distributed as ₦4.375 billion to the Federal Government, ₦14.582 billion to the State Governments, and ₦10.208 billion to the Local Government Councils. The increase in revenue resulted from a ₦100 billion augmentation to shared revenue and significant increases in Companies Income Tax (CIT) and Petroleum Profit Tax (PPT). This increase in total distributable revenue implies improved tax collection. However, VAT declined during the period under consideration. Other tax measures, such as gas royalties, import duties, and excise duties, also experienced revenue declines. Such declines in VAT and trade-related taxes, such as import and excise duties indicate weakened consumer spending, lower import activity, rising inflation, reduced purchasing power, and a slower economy. Therefore, the government should implement targeted consumer stimulus programme or tax relief for low-income households to boost spending and expand the VAT base. The government should also strengthen tax administration and compliance in non-oil sectors while stimulating domestic production and consumption to reverse declines in VAT and trade-related revenues