Last week felt like a tug-of-war between two different worlds. On the one hand, global tech giants were looking over their shoulders as the rise of artificial intelligence loomed. The AI trade that seemed unstoppable is being questioned for the second week in a row. On the other hand, the Nigerian market was finding its stride, fueled by local policy changes that have significant implications for your portfolio. And across Africa, central banks are making moves that signal growing confidence in their economies.
Here is a recap of everything that went down last week.
Global Economy
US: The AI Selloff Enters Its Second Week
For months, AI was the golden child of the US stock market. However, US equities closed broadly lower again as concerns about AI’s disruptive impact across multiple industries continued to weigh on markets. The Nasdaq Composite led losses, declining 2.10%. The S&P 500 fell 1.39%, and the blue-chip Dow Jones dropped 1.23%. Mid-cap stocks held up better than most, with the S&P MidCap 400 falling just 0.66%.
But the headline numbers only tell part of the story. Beneath the surface, for the seventh consecutive week, value stocks outperformed growth stocks. The Russell 1000 Value Index has now widened its year-to-date lead over its growth counterpart to more than 1,100 basis points. That’s 11 percentage points.
To put that in context: if two investors started the year with the same amount of money, one in a growth fund and one in a value fund, the value investor would be 11% ahead right now. Seven weeks of consistent outperformance reflect a new market regime.
Japan: Election Win Sends Markets Surging
While the US was selling off, Japan was buying up. The Nikkei 225 surged 4.96%, and the broader TOPIX advanced 3.24%, making it one of the best weeks for Japanese equities in recent memory. The catalyst was the February 8 lower house election, in which Prime Minister Sanae Takaichi’s Liberal Democratic Party won a supermajority, securing more than two-thirds of the parliamentary seats.
Markets read this win as a green light for Takaichi’s economic agenda: aggressive fiscal spending, increased public investment, and targeted tax cuts. When a government wins by that kind of margin, it has both the mandate and the parliamentary muscle to push its policies through quickly.
There is a longer-term angle, too. The supermajority gives the government enough seats to pursue constitutional amendments, including potential changes to Japan’s longstanding pacifism clause. If that happens, it will pave the way for a meaningful expansion in defense spending over the coming years.
Sub-Saharan African Economies
The African Eurobond market saw yields drop, which means prices are going up and investors are feeling more confident:
Angola: Inflation Falls to Three-Year Low
Angola’s headline inflation eased to 14.56% year-on-year in January, down from 15.70% in December. That’s the softest reading since August 2023 and continues a disinflation trend that’s been running since August 2024. The main driver is stability in the kwanza, Angola’s currency. When a currency holds its value, imported goods don’t get more expensive, and that keeps overall price growth in check.
The cooling was broad-based. Food and non-alcoholic beverages fell to 14.89% from 16.15%. Clothing and footwear dropped to 13% from 14.34%. Housing and utilities eased to 16.60% from 17.01%. Furnishings and household equipment dropped to 13.18% from 14.3%. Every month, prices rose just 0.68% in January, down from 0.95% in December. That monthly figure has been the lowest since March 2015.
The consistent downward trend gives the Bank of Angola room to consider easing monetary policy if the momentum holds. For now, the story is about an economy gradually getting its inflation problem under control after years of high prices.
Egypt: Second Consecutive Rate Cut
The Central Bank of Egypt cut its key policy rate by 100 basis points to 19% on February 12. This is the second consecutive reduction and takes borrowing costs to their lowest level since July 2023. The move was widely anticipated by markets.
Two things made this cut possible. First, inflation is falling. Annual urban inflation slowed to 11.9% in January from 12.3%, a four-month low. Core inflation, which strips out food and energy, eased for the second straight month to 11.2%, its lowest level in five months. Second, the Egyptian pound has been strengthening, which reduces imported inflation and gives the central bank flexibility to ease without risking a currency-driven price spiral.
Domestic Economy
Major Updates During the Week
1. FX Window Expansion
The Central Bank of Nigeria increased the weekly transaction limit for Bureau de Change (BDC) operators in the official FX window to $150,000 from $25,000 previously. That’s a sixfold increase. Bureau de Change operators are the businesses most Nigerians use to exchange currency for travel, school fees abroad, or everyday transactions.
By expanding the amount they can access at the official rate, the CBN is widening access to official FX pricing and reducing the gap between the official and parallel market rates. This is a meaningful step toward a more functional foreign exchange market.
2. Pension Reform Sparks Equity Demand
Your pension contributions have been doing something quiet but powerful for years. Every month, a portion of your salary goes into a fund that gets invested on your behalf. Most people don’t think much about exactly where that money goes. But this week, a regulatory change answered that question.
The National Pension Commission (PenCom) raised the allowable investment limits for pension funds in Nigerian equities. The new caps are
- RSA Fund I: 35%
- RSA Fund II: 33%
- RSA Fund III: 15%
- RSA Fund VI (Active): 33%
These aren’t minor adjustments. Nigerian pension funds manage trillions of naira on behalf of millions of contributors. Raising the equity ceiling by even a few percentage points translates into massive amounts of money that fund managers can now redirect from bonds into stocks.
Equity Market: NGX Rallies on Pension-Driven Buying Interest
The NGX All-Share Index jumped 6.16% to close at 182,313.08 points, up from 171,727.49 the previous week. Market capitalization rose by ₦6.8 trillion to ₦117.03 trillion. Year-to-date returns now stand at 17.16%. If you owned Nigerian equities coming into this week, it was a perfect five days.
The PenCom reform was the direct trigger. Pension fund managers, now permitted to hold more equities, moved quickly. Buying was concentrated in large-cap stocks favored by pension funds for their size, liquidity, and stability. MTN Nigeria, Dangote Cement, Zenith Bank, Seplat, and GTCO all saw strong demand, driving the market higher.
What made this week different from a typical rally is consistency. Bullish sentiment held across all five trading sessions. There was no sharp spike followed by a pullback. Just steady, purposeful buying throughout the week as institutions rebalanced their portfolios to the new limits.
Market breadth was firmly positive, with 79 stocks advancing against just 27 decliners. All major sector indices closed in the green, and Oil and Gas emerged as the top sector with an 11.40% weekly gain.
Fixed Income Market: Rally Extends as Investors Position Ahead
There was no Treasury Bill auction this week, but that didn’t stop buying activity. Investors stepped into the secondary market early in the week, pushing yields lower across the curve. The average T-Bill yield declined by 8 basis points to 17.55%.
With another auction coming up soon, the smart thing to do is to lock in idle cash now before the crowd pushes these rates even lower.
The bond market followed a similar pattern. A couple of sessions saw mild selling pressure, but sustained demand, particularly at the long end of the curve, pushed the average yield down by 5 basis points to close at 16.12%. Investors chasing longer-dated bonds are betting that rates will continue to fall and lock in current yields before that happens.
Nigeria’s Eurobonds joined the rally. Average yields compressed by 7 basis points to 7%, the tightest level in recent weeks. Foreign investors buying Nigerian dollar bonds are making a deliberate bet on the country’s creditworthiness and reform trajectory.
Analysts expect buying to continue next week as investors position ahead of the upcoming Treasury Bills auction. When investors load up in advance of an auction, it typically lowers stop rates, enabling the government to borrow more cheaply.
The Bottom Line
What this week made clear is that markets are increasingly sensitive to policy signals, not just economic data.
A regulatory change moved billions of naira into equities overnight. An election result in Japan repriced an entire index within days. A rate cut in Egypt reflected months of quiet macroeconomic progress that finally reached a tipping point. None of these were random events driven by sentiment. They were deliberate policy decisions producing predictable market outcomes, which is precisely how well-functioning markets are supposed to work.
The more important question is what happens when momentum meets the more complex work of implementation. Sentiment can shift a market in a week, but sustaining those gains requires the kind of structural progress that plays out over the long term.
For investors watching these markets, the signals this week were encouraging. Whether they translate into durable returns depends entirely on what policymakers do next.
