A Review of the Nigerian Energy Industry

Financial market update

2 November 2011, Sweetcrude, Lagos – International news
· USD – The dollar slid against 11 of its 16 major peers as economic reports this week may show the US recovery is faltering, adding to speculation Federal Reserve policy markets will signal their willingness to embark on more asset purchases or quantitative easing as they conclude a two day meeting today.

· EUR – The Euro pared an earliest drop versus the dollar after Greek officials told reporters that the Cabinet gave Papandreou unanimous backing for his referendum plans.

· JPY – The Yen advanced against 14 of its16 major counterparts as renewed speculation of Europe’s debt crisis is worsening boosted appetite for safer assets. The JPY rose 0.3% to 78.14 per USD after tumbling as much as 4.6% on October 31 on the back of BOJ intervention.

· Gas discoveries in some African countries and the UK are diminishing Nigeria’s status as a major exporter of the commodity and putting serious pressure on the nations revenue from gas as the sector struggles to attract new investment. Nigeria earned an estimated $6billion from gas exports over the last six years to rank it top 10 of major producers globally but lack of new investments and new gas field development have seen it gradually being over taken by even lesser known gas producing countries.

· Bonds – Some attempt at a correction on the 20yr yesterday morning as the yield went up about 65bps at the open of the session. That move was met by stiff opposition to the upward direction in yields as the bond was bought all the way back down to the open and then later sold slightly to close about 25bps above yesterday’s close. Trading activity continues to be very volatile with the market grappling with the distorted curve.

· Bills – A sell off to open yesterday which only lasted the first half hour. Rates went up 40bps on average as a result and stayed at those levels to close today.

. Money Market – OBB is stable at 14.00% while unsecured rates went up 200bps to 18.00% as the delay in the monthly statutory allocation which is the major contributor of liquidity leaves market very illiquid. There is no certainty as to when the flow will come for this month and we might possibly the delay last until next month.”

NIBOR(%)                                              LIBOR (%)
O/N              17.2917                           USD 1 month                   0.2453
7 Day           17.5833                           USD 2 month                  0.3349
30 Day        17.9167                           USD 3 month                  0.4317
60 Day        18.2500                           USD 6 month                  0.6225
90 Day        18.5417                            USD 12 month                0.9397
Y/Y Consumer Inflation Sep 2011 :                                            10.30%
FX Reserves: 27 October 2011                                        USD33.02bn
MPR                                                                                                          12.00%

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