A Review of the Nigerian Energy Industry

Financial market update

2 December 2011, Sweetcrude, Lagos – Local and international financial market update.

· USA – The USD and the JPY headed for their biggest weekly declines against the EUR in more than a month as sings the US economy is picking up damped demand for haven currencies.

· INDIA –The Indian rupee was poised for its first weekly advance since October after sentiment for emerging market assets were bolstered on the back of developments in the Eurozone. Nov 30, saw net purchases of Indian shares by foreigners to the tune of USD27 million.

· CHINA – The Yuan halted a three week loss as the dollar weakened following the moved by global central banks to cut interest bank funding rates in the US Currency. The PBOC raised the reference fare for the yuan by 0.07% to 6.3310 per USD. China also lowered the amount of cash banks must set aside as reserves this week for the first time in three years to prop up growth.

· The Federal Government plans to produce 3mio barrels per day (bpd) of crude oil by 2015 and build three new refineries adding 445,000 bpd of capacity, the oil minister said on Wednesday, ambitious plans which have been promised before. Analysts and oil executives doubt the plans are achievable. Africa’s largest energy industry is struggling because a far reaching Petroleum Industry Bill (PIB) has been locked in dispute for four years, depriving it of billions of dollars in lost foreign investment, oil and government officials say. [Businessday]

· Bonds – Volatile session yesterday with trading concentrated on the 2013s and 2014s. Yields closed up an average 40bps on the short end. The long end was relatively quiet today seeing rates up about 10bps. Short end rates will track what’s happening with the T-bill market and so are expected to continue to trade relatively high.

· Bills – With the central bank coming out again yesterday to offer another N100bio in OMO bills the sell off continued in the market as market players continue trying to switch for higher yields at the OMO window.

· Money Market – OBB closed an average 15.00% while unsecured rates averaged 17.00%. The monthly statutory allocation has been approved and we will expect the flows into the system before the end of the week so liquidity should ease a little. The CBN is however squeezing liquidity ahead of the inflow so we won’t see rates crash or trade too low.”


                        Hi                  Low            Close        Prev.Close

USD/NGN  161.60/70    161.05/15     161.10/20     161.20/30

NIBOR (%)                                   LIBOR (%)
O/N                  18.0833               USD 1 month        0.2714
7 Day                18.2917                USD 2 month       0.3870
30 Day             18.5000               USD 3 month       0.5272
60 Day             18.7500                USD 6 month       0.7472
90 Day             19.0000               USD 12 month      1.0649
Y/Y Consumer Inflation Oct 2011 :                               10.50%
FX Reserves: 24 November 2011                   (USD bn) 33.06
MPR                                                                                     12.00%
Source: FMD and CBN


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