A Review of the Nigerian Energy Industry

Financial market update

11 October 2011, Sweetcrude, Lagos- International News
· EUR – The euro clung to previous day’s huge gains after hopes for a new EU debt plan sparked a correction in a deeply bearish market, though sentiment remains fragile as European leaders have disappointed many times before.

· INR – The Indian Rupee gained for the fourth session and hovered near a two week high, helped by foreign fund inflows on the back of strong local stocks, though the rally may not last much longer due to a lack of concrete euro debt plan

Nigeria News
· Bonds –
Bearish markets as players tried to anticipate a possible hike at the MPC. Yields went up across the curve and the market is set for another spell of volatility as yields are set to soar in trading tomorrow.

· Bills – Also a very bearish and one directional market yesterday and the MPC decisions have set up the next few days for more of the same.

· Money Market – OBB is holding at 11.25% while unsecured O/N rates went up to 11.75%. This is set to rise to a minimum OBB 14.00% and overnight somewhere around 14.50% in reaction to the hike in MPR and increase in CRR.

· Interbank –
At the CBN FX Auction yesterday, we saw a further weakening with an all time high depreciation of the local currency ( Naira) against the US Dollar by NGN 1.51 from the previous session to close at an all in rate of $/NGN 158.4791 (inclusive of the CBN Commission). Amount offered and sold was $400mio against a demand of $736mio

Hi             Low            Close          Prev.Close
167.90/00    159.95/05    164.20/30    164.10/20

· Extra ordinary MPC meeting outcomes

The Nigerian MPC hikes its policy rate by an unexpected 275 bps to 12.00% leaving the asymmetric corridor at +/- 200bps.The cash reserve ratio is doubled to 8.00% from 4.00% with daily maintenance over the five week averaging which was the case previously. Banks NOP limits have been cut from 5.00% to 1.00% effective immediately and banks have till October 14th for full compliance. The CBN clearly showing its resolve in having a stable currency and ensuring the value of the naira while also keeping the economy attractive to FDI

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