A Review of the Nigerian Energy Industry

Financial market update

1 November 2011, Sweetcrude, Lagos – International news
· EUR – The EURO fell versus the dollar and yen on speculation an economic slowdown in the region will pressure the ECB to consider cutting rates.

· ZAR – The rand declined for a third day against the dollar after the prospect of a Greek referendum on a European Union bailout and a slowdown in Chinese manufacturing snapped demand for riskier emerging market assets.

· JPY – Japan’s intervention yesterday estimated by analysts to exceed USD50 billion may not be enough estimated by analysts to stop the yen’s climb to as strong as 60 per dollar by 2013 according to capital economics Ltd

· As the cost of funds shoots up, following the recent hike in the MPR by the CBN state governments may have directed their financial consultants to move away from bank loans already in progress. They are opting for the bond market, where the rates are lower and terms are longer, to enable them carry out their developmental projects.

· Bonds – Yields rallied yet again yesterday in a very bullish session. The 20yr yield continues to dip, trading over 120bps below the 2 & 3yr. The 20year appears very illiquid and in high demand and this distortion in the curve is likely to remain for some time yet.

· Bills – The market opened selling yesterday morning pushing rates up, by noon the retracement began though rates still closed an average 15/20bps above the open. Liquidity continues to return to the secondary market with trade volumes picking up.

· Money Market – OBB is stable at 14.00% while unsecured rates are at 16.00%

· NGN Foreign exchange – CBN offered and sold $200mio, total demand was $252.34mio with the lowest intervention rate at 151.7525 [inc. the 1% commission], 20 points depreciation against the previous auction.

NIBOR(%)                                    LIBOR (%)
O/N               16.2917                  USD 1 month              0.2458
7 Day             16.8333                 USD 2 month              0.3347
30 Day          17.2917                  USD 3 month              0.4294
60 Day          17.6667                  USD 6 month              0.6197
90 Day          17.9583                  USD 12 month            0.9337
Y/Y Consumer Inflation Sep 2011 :                                   10.30%
FX Reserves: 27 October 2011                             USD33.02bn
MPR                                                                                         12.00%
Source: FMD and CBN

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