A Review of the Nigerian Energy Industry

Financial market update

14 November 2011, Sweetcrude, Lagos – International and local financial market update:
· EUROPE – The euro maintained a two day gain on prospects confidence in Italy’s ability to curb its debt will be revived after Mario Monti, a former European Union competition commissioner, takes over as prime minister. The Euro was at 1.3755 this morning.

· JAPAN – Japan’s economy expanded for the first time in four quarters as exports recovered since the earthquake. GDP grew at an annualized 6% in the three months ending Sep 2011. The fastest pace in 1 ½ years.

· CHINA – Barack Obama continued pressing China on currency and trade issues, saying “enough is enough” on what the US views as a too slow appreciation of the Yuan. The Yuan has gained about 8% against the USD in nominal terms since 2010 and 30% since July, 2005.

· “Nigeria intends to achieve a GDP of $900 billion by 2020, the minister/deputy chairman, National Planning Commission (NPC), Shamsudden Usman said yesterday. This projection came hours before the president of Dangote Industries Limited, Aliko Dangote said Nigeria was a much better than the BRIC countries in terms of doing business. Usman said that the Vision 20:20 target is to attain a GDP of not less than 900 billion and per capital income of not less than $4,000″

· Bonds – Some very light selling on Friday looking ahead to the bond auctions which comes up this week. Though the system is still liquid, some players will likely try to switch this week and sell the current yields and aim to replace with higher at the primary auction.

· Bills – Despite an OMO offering on Friday of 139 and 167 day bills the market was still fairly bullish due to the experiences of the last two OMO offerings where the CBN failed to sell the high rates due to system issues. Rates dipped an average 15-30bps across all the maturities. Expectation is that the CBN will keep trying to mop up steadily this week.

· Money Market – OBB stable at 12.00% with unsecured rates up 50bps to 13.50% as the flow from FAAC is keeping the market liquid. The CBN keeps trying to mop up liquidity through OMO bills but fails to take any size due to the high rates bid at the auction as they do not wish to show desperation. ”

NIBOR%                                LIBOR (%)
O/N                13.58330        USD 1 month          0.24900
7 Day              14.20830       USD 2 month          0.34850
30 Day           15.16670         USD 3 month          0.45720
60 Day           15.62500        USD 6 month          0.65860
90 Day           15.95830        USD 12 month         0.98140
Y/Y Consumer Inflation Sep 2011 :                           10.30%
FX Reserves: 10 November 2011                 USD33.06bn
MPR                                                                                  12.00%
Source: FMD and CBN

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