A Review of the Nigerian Energy Industry

Financial market update

4 November 2011, Sweetcrude, Lagos – International news
· USD – The dollar held a two day drop versus the euro before data forecast to show the US jobs growth slowed and unemployment rate remained unchanged, support the case for the Federal Reserve to consider monetary easing.

· EUR – The Euro strengthened versus the USD for s second day after Greek prime Minster George Papandreou signalled he won’t call for a referendum on a bailout plan, easing concern voters would reject tit and send the country into default.

· CNY – China’s economy may grow at 8.5% next year, the slowest pace in a decade according to central bank adviser Li Daokui. Inflation may moderate to 2.8% on reduced pressure from food and grain prices. That would compare with 5.7% in the first nine months of this year.

· At last, the federal and state governments have ended their feud over deductions of funds from the Federation Account for fuel subsidy. The states had at the last meeting of the FAAC refused to share the revenue accruing to the country for last September until the money deducted for fuel subsidy at source was returned. But yesterday in Abuja, the states reached a truce with the Federal Government and accepted to share the revenue realised for the period.

· Bonds – The market was quiet yesterday and largely stable even with the inflow expected from the monthly statutory allocations demand hasn’t yet returned to the markets.

· Bills – Rates keep moving upward steadily as the market keeps selling off. Another 10bps average upward adjustment yesterday. With liquidity tight some players are trying to raise some through the bill market as well as make room for anticipated OMO offerings to mop up once the FAAC liquidity hits the system.

· Money Market – OBB is stable at 14.00% while unsecured rates closed at about 17.00%. With the stalemate regarding the monthly statutory allocation resolved we will likely see the flows in tomorrow or next week and see rates dip. ”

NIBOR (%)                                  LIBOR (%)

O/N                 17.417                  USD 1 month              0.2475
7 Day               17.3750               USD 2 month             0.3373
30 Day            17.6583               USD 3 month             0.4350
60 Day            17.9583               USD 6 month             0.6269
90 Day            18.2500              USD 12 month            0.9449
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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