A Review of the Nigerian Energy Industry

Financial market update

24 November 2011, Sweetcrude, Lagos – Local and international financial market update.

· EUROPE – Growth in Europe’s largest economy, Germany is expected to slow to a near standstill next year as the worsening turmoil curbs demand in the 17 nation block which happens to be Germany’s biggest export market.

· INDIA – India’s food inflation slowed to the lowest level in almost four months after prices of onions, wheat and potatoes fell. This trend may be short lived as the 14.5% drop in the INR against the USD may threaten to boost import costs.

· CHINA – China widened efforts to support cash strapped companies in Zhenjian and rural areas hit by a credit squeeze that is slowing economy. The PBC cut the reserve ration for more than 20 rural credit cooperatives national wide by 0.50% to increase liquidity

· Committees of both the Senate and House of Representatives, are working on two parallel tracks which will result in the presentation of a bill to compel large commercial entities like MTN, Globacom, Airtel, Etisalat and the oil firms, to list their shares on the NSE. A key part of the initiative is to compel the telecommunication companies operating in Nigeria, to transit from being private entities, to listing their shares on the exchange.

· Bonds – The rally that started on Tuesday continued into Wednesday and was also sustained through the session. The demand spread across the 2013s, 2014s 2015s and 2030s as the yields dipped significantly in continued reaction to the MPC holding the benchmark stable at 12.00%. Yields will still likely trade lower, the only thing that will slow the rally will be the FAAC inflow and resultant OMO auctions to mop up the liquidity.

· Bills – The buying continued in the bill market yesterday as we saw rates dip another 50-70bps, as it is auction day there was still a lot of apprehension in markets as players went it to try and catch relatively higher yields at the primary.

· NGN: CBN offered and sold $250mio, total demand was $411.62mio, lowest intervention rate was at 157.7721, 101 points depreciation against the previous auction.


                        Hi                Low             Close          Prev. Close
USD/NGN   159.80/90   158.58/68   159.70/80    159.30/40

NIBOR (%)                       LIBOR (%)
O/N               16.7500      USD 1 month             0.2572
7 Day             17.1667       USD 2 month             0.3772
30 Day          17.5417        USD 3 month             0.5061
60 Day          17.8750       USD 6 month             0.7189
90 Day          18.1667       USD 12 month            1.0414
Y/Y Consumer Inflation Oct 2011 :                       10.50%
FX Reserves: 17 November 2011            (USD bn) 33.01
MPR                                                                             12.00%
Source: FMD and CBN

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