Nigeria’s Markets Stay Cautious as Earnings Strength and Liquidity Signals Shape Sentiment
Recent economic and market developments point to an environment defined by resilience rather than momentum. While corporate earnings, particularly in the banking sector, remain supportive, financial markets continue to reflect selective positioning.
The Big Picture: Earnings Resilience Anchors Sentiment
Zenith Bank Plc delivered a resilient 9M’25 performance, reinforcing the role of core earnings as a stabilizing anchor for the banking sector. Gross earnings rose by 16% year on year to ₦3.37 trillion, driven by a strong 41% increase in interest income to ₦2.7 trillion, despite a 6% contraction in the loan book.
Higher asset yields and expanded investment holdings helped offset subdued loan growth, while stable funding costs supported net interest margin expansion to 11.0%, even as interest expense rose 22% year on year to ₦814.2 billion on a larger deposit base. Profitability remained solid, with ROAE at 24.8% and ROAA at 3.31%, highlighting the durability of earnings quality.
Looking ahead, the normalization of impairment charges and full exit from regulatory forbearance are expected to ease profitability drag. Interest income is projected to remain the primary earnings driver, supported by improving asset yields and gradual loan growth, while non interest revenue should recover as FX liquidity improves and digital and fee based channels continue to scale.
Equities Market: Selective Positioning Amid Softer Breadth
The Nigerian equities market closed the week slightly lower, with the NGX All Share Index declining by 0.09% to 165,370.40 points. Despite the marginal pullback, market capitalization edged up by 0.18% to ₦106.15 trillion.
Trading activity moderated, reflecting cautious investor sentiment, as turnover declined to 3.08 billion shares valued at ₦81.51 billion, compared to 3.75 billion shares worth ₦99.87 billion in the previous week.
Sector Performance: Rotation, Not Retreat
Sectoral performance reflected mixed sentiment and selective interest.
Insurance led gains at 0.81%, supported by strong rallies in Veritas Kapital, Guinea Insurance, and Wapic.
Consumer Goods advanced by 0.69%, as gains in International Breweries and Cadbury offset losses in Champion Breweries.
Industrial Goods edged higher by 0.09%, supported by Berger Paints and Lafarge Africa.
Oil and Gas closed marginally higher by 0.06%, driven by gains in Eterna.
Banking declined by 0.63%, weighed down by losses in FirstHoldCo and FCMB.
Market breadth weakened, with 49 decliners versus 44 gainers, underscoring cautious positioning rather than broad based risk off behavior.
Fixed Income: Liquidity Tightens, Demand Remains Strong
System liquidity declined to ₦1.87 trillion from ₦2.72 trillion following OMO auctions, pushing the overnight and open buy back rates up by 357 basis points to 26.36% and 26.07%, respectively.
At the primary market, demand remained robust. The FGN bond auction recorded ₦2.25 trillion in subscriptions against ₦900 billion offered, with ₦1.54 trillion allotted across the 5 year, 7 year, and 10 year tenors. Stop rates settled lower at 17.62%, 17.50%, and 17.52%.
OMO auctions later in the week also attracted strong demand, with stop rates clustering around 17.20% to 17.25%. In the secondary market, sentiment remained bullish, with the 364 day NTB yield declining by 153 basis points to 19.28% and bond yields falling across the 2 year to 7 year tenors, led by the 7 year segment.
FX and Liquidity: Naira Strengthens as Conditions Improve
At the FX market, the naira appreciated significantly at the NFEM window, gaining ₦35.08 to close at ₦1,386.55 per US dollar, reflecting improved liquidity conditions and easing near term pressures.
Domestic Economy: Credit Growth Improves, Volatility Persists
CBN data showed private sector credit rising modestly to ₦75.8 trillion in December 2025 from ₦74.63 trillion in November, signaling improved year end credit growth. However, on a year on year basis, private sector credit declined by 2.8% from ₦78.02 trillion, highlighting persistent volatility in financing conditions.
Net domestic credit rose sharply to ₦110.05 trillion from ₦100.98 trillion in November and was up 4.7% year on year, driven largely by increased government borrowing and sustained private sector demand. The MPC’s 50 basis point policy rate cut to 27% in September continued to support improved credit conditions into Q4’25.
Global Markets: Policy Pause, Mixed Risk Sentiment
Global equities delivered mixed performances. US stocks advanced, with the S&P 500 briefly crossing 7,000 before paring gains, as large company value stocks outperformed growth. The Federal Reserve held rates steady at 3.50% to 3.75% following three consecutive cuts, with two policymakers dissenting in favor of a further 25 basis point reduction.
European equities softened amid trade and geopolitical concerns, UK equities edged lower despite sterling strength, and Asian markets reflected cautious positioning. In global fixed income, bond markets remained volatile, although corporate bonds outperformed sovereigns on stable credit fundamentals.
What This Means for Investors
Equities: Earnings resilience, particularly in the banking sector, supports selective exposure, although broad based upside remains constrained by cautious sentiment.
Fixed Income: Strong demand amid tight liquidity underscores the appeal of yields, though volatility around primary auctions is likely to persist.
Bottom Line
Nigeria’s markets continue to reflect a balance between resilience and caution. Corporate earnings remain supportive, liquidity conditions are gradually improving, and investor activity is increasingly selective rather than risk averse. In this environment, disciplined positioning, combining selective equity exposure with income generating fixed income assets, remains key as macro and policy signals continue to evolve.
