A Review of the Nigerian Energy Industry

Financial market update

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

· EUROPE – Gold dropped as the USD rebounded on renewed concern that Europe would struggle to contain its crisis after Moody’s Investor Services said it may cut debt ratings for banks in the region.

· INDIA – Indian rupee rose for a second day on speculation an auction of debt purchase quotas to overseas investors tomorrow will spur investment inflows. The INR advanced to 51.93 per USD as of 9.30am Mumbai time today.

· CHINA – China stocks rose sending the benchmark index up the most in two weeks on speculation the government will take measures to bolster the economy and European leaders will boost efforts to end the debt crisis

· As the CBN concludes plans to commence its cashless initiative due to take off in the country next year, the apex bank has noted that besides encouraging the use of more efficient non-cash alternatives, attention will be shifted to the velocity of the currency-in-circulation. Deputy Governor, CBN, Tunde Lemo, explained that with attention shifting to the velocity of currency-in-circulation, the number of times a single currency note will pass through processing will be increased as banknotes will be quickly processed and unfit ones re-issued.

· Bonds – With liquidity tight and the possibility of OMO auctions coming as the monthly statutory allocations feed into the system there was a selloff in the market yesterday. The focus continued to be on the 2013 and 2014 maturities which went up an average 60bps. The longer end was also sold with the 2015s up 40bps and the 2030s up 15bps to close the day.

· Bills – the market was very bearish with rates sold all across the bill maturities. This comes on the back of Friday’s OMO auction and the current tight liquidity situation. We expect a lot of volatility as when the statutory allocations come in we might see some demand feed into the bill market and we will see a sell off as the CBN offers OMO securities

· Money Market – OBB went up 100bps to close at 15.00% while unsecured rates went up 200bps to 17.50% today as the market opened short about 60bio. Flows are expected in this week from the monthly statutory allocations. We will possibly see significant volatility in funding rates this week. ”

· NGN: CBN offered and sold $200mio, total demand was $315.63mio… depreciated by 105 points to 158.8326 [inc. the 1% commission] from the previous auction. Weighted average 158.9639 [inc. the 1% commission].


                          Hi                   Low               Close               Prev.Close

USD/NGN   160.40/50       159.45/55       160.05/15          159.55/65


NIBOR  (%)                             LIBOR (%)
O/N                 16.8333           USD 1 month      0.2600
7 Day               17.3333           USD 2 month      0.3834
30 Day            17.7500           USD 3 month      0.5231
60 Day            18.0000          USD 6 month      0.7397
90 Day            18.2917            USD 12 month    1.0604
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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