A Review of the Nigerian Energy Industry

Financial market update

8 Decedmber 2011, Sweetcrude, Lagos – Local and international financial market update.
· EUROPE – Germany and the Netherlands are selling short-maturity debt at record-low yields, with traders willing to take a loss to own the safest securities as the collateral banks use to raise funds becomes scarcer. Germany agreed December 5 to a yield of 0.0005 percent to borrow for six months, the least since year 2000, while the Netherlands auctioned three month debt at a yield of minus 0.004 percent the same day.

· U.S.A – The U.S. economy may have achieved a sustainable pace of growth that eases pressure on the Federal Reserve to buy more bonds while giving it time to fine tune how it informs the public about the outlook for interest rates. Since early November, reports on employment, manufacturing and retail sales have dispelled concerns the world’s largest economy may slide back into recession.

· CHINA – Most global investors predict China will face a banking crisis within the next five years, paring their appetite for the nation’s shares and eroding confidence in its leadership. Sixty percent of respondents in a Bloomberg poll said they anticipate a crash in the financial industry by late 2016, and only 10 percent were confident China’s banks will escape trouble

· Economic / Central Bank News

The latest edition of the Nigerian Banks Financial Transparency Report, a joint publication of BusinessDay and Source Capital Research shows that 78.48% of all bank loans actually mature within a period of three months, with 83.31% maturing within six months. The analysis further shows that 87.73% of all loans mature within one year, with only about 12.26% having a maturity profile of between one and five years, and less than 1% going above five years.

· Bonds – Very quiet session yesterday, most of the few trades executed came in the last hour of trading with some selling on the 2015s.

· Bills – Cautious trading in the bill market yesterday as most players were looking to the auction result for direction. Yields dipped as demand fed into the shorter dated maturities but went up on the longer dated maturities as some players tried to sell off and create room for better yields.

· Money Market – OBB up slightly to 14.50% while unsecured rates remained stable at 16.50%.”

· NGN: CBN offered and sold $200mio, total demand was $245mio. CBN cut-off rate was 156.70

                           Hi                 Low              Close            Prev.Close
USD/NGN   161.80/90     161.42/52       161.67/77       161.50/60

NIBOR (%)                          LIBOR (%)
O/N              16.1667           USD 1 month          0.2763
7 Day            16.5000          USD 2 month         0.3964
30 Day         16.7917            USD 3 month         0.5400
60 Day         17.0833           USD 6 month         0.7600
90 Day         17.2917            USD 12 month        1.0812
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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