A Review of the Nigerian Energy Industry

Financial market update (updated)

 12 October 2011, Sweetcrude, Lagos- At the just concluded CBN auction, the naira strengthened further to close at an all in rate of $/NGN 151.50

 Amount offered – $ 400 million

Amount demanded – $ 591 million 

Amount Sold – $ 591.67 million

Lowest intervention rate – $/NGN 151.50( inclusive of the CBN commission)

 Nigerian Interbank Foreign Exchange rate

 Open: $/NGN 157.40/50

Current levels: 154.08/18

 International News
· EUR – The euro fell broadly reversing its corrective rally made on hopes for a solution to the debt crisis, with fragile risk sentiment soured after the Slovak parliament rejected a plan to expand the euro zone rescue fund

· GBP – The pound weakened against the euro after a report showed Britons’ confidence in the employment outlook fell, underlining the fragility of the economy. Sterling depreciated versus most of its 16 major peers, losing most against Switzerland’s franc and Norway’s krone.

Nigeria News
· Bonds – Yields spiked 100bps across the curve in reaction to the hike in the MPR. There was some resistance along the curve as some market participants are clearly struggling to get their heads round the new traded levels which are highest traded levels for all the securities. We will likely still see some upward correction with the 20yr likely to breach the 15.00% level before the end of the week.

· Bills – Very patchy trading day as the market grappled with the new levels given the hike in the MPR. The auction on Wednesday will give direction to the markets and help boost liquidity across all the maturities.

· Money Market – In direct reaction to the rate hike at the MPC meeting yesterday, OBB went up 275bps to 14.00% and unsecured overnight to 14.50%. Rates are expected to stay high and rise as liquidity is expected to stay tight over the next couple of weeks given the increase in CRR.

· Interbank – The Nigerian Naira strengthened sharply after the measures announced by the Central bank on Monday, the naira opened at $/NGN 163.00/163.10 but later closed at $/NGN 158.80/158.90 firmer than the record low of $/NGN 167.70 seen on Monday prior to the MPC meeting. To further aid the strengthening of the naira, the Central Bank had a special intervention, selling a total of $200mio at a marginal cut of rate of $/NGN 153.00

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164.10/20 158.40/50 158.80/90 164.20/30

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