A Review of the Nigerian Energy Industry

Financial market update

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

· EUROPE – As bond yields in certain Euro Zone countries rise to record levels, investors sell the EUR for currencies of countries that do not depend on international capital markets to finance their budget deficits. The Norway Krone, Swiss Franc are some such currencies that have appreciated over the past few months.

· INDIA – Prime Minister Manmohan Singh is taking further steps to open up India’s economy to support the rupee. Global funds may be allowed to buy company bonds without restrictions and foreign individuals investors could purchase local shares and allowed the likes of Wal-Mart Stores Inc and Tesco Plc to take majority stakes in retailers.

· CHINA – Chinese corporate profits growth slowing on waning export demand from Europe may be further undermined as a campaign to cool property prices reduces the value of investments. Industrial companies net income rose 12.5% in October from a year earlier. Compared to 27% growth seen from January to September.

· Indications have emerged that the 24 Deposit Money Banks in the country may reduce their lending rate by 30 per cent as from next year. The development comes on the back of the Bankers Committee saying that banks had unanimously endorsed an initiative by the CBN to reduce lending rates through a drastic cost-trimming strategy in line with the new repayment regime. [Punch]

· Bonds – The market turned on Friday with profit takers and some investors who have been waiting to exit positions leading the selling. Most of the focus was concentrated on the shorter end of the curve the 2013s (up 51bps on the day) and 2014s (up 31 bps on the day). This change in market direction also came just as the CBN offered OMO bills of N100bio which usually pushes up short end yields.

· Bills – Most of Friday saw very bullish trading as some of the demand which failed at yesterday’s auction fed into the secondary market. There was a slowdown towards the close as news of an OMO offering by CBN hit the market. Investors and market players will rather put in bids at the OMO in expectation of higher yields.

· Money Market – OBB closed the week at 14.00 while unsecured rates closed at 15.50%. We will possibly see rates very volatile next week as the CBN tries to come in to mop up liquidity ahead of the expected FAAC flows. ”


                            Hi                   Low               Close             Prev.Close

USD/NGN        159.56/66     159.22/32    159.55/65       159.30/40

NIBOR  (%)                           LIBOR (%)
O/N                   16.2083       USD 1 month        0.2594
7 Day                 16.7500       USD 2 month        0.3809
30 Day              17.0833       USD 3 month         0.5181
60 Day              17.3750        USD 6 month         0.7342
90 Day              17.6250        USD 12 month        1.0516
Y/Y Consumer Inflation Oct 2011 :                         10.50%
FX Reserves: 22 November 2011             (USD bn) 33.06
MPR                                                                              12.00%
Source: FMD and CBN

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