Financial market update

05 January 2012, Sweetcrude, Lagos – Local and international financial market update.
The Euro slumped against 12 of 16 major peers after Greek Prime Minister Lucas Papademos warned his nation may face economic collapse as soon as March. The markets are treating the USD and the JPY as the only safe havens under the current scenarios.

· INDIA: International investors are demanding the highest yields in almost two years to hold bonds of India’s lenders after the central bank warned that bad debts may more than double in Asia’s third largest economy. Soured loans may climb to 5.8% of total advances in two years from 2.8% in September in the worst case scenario, the RBI said.

· ASIA: Asia’s hedge fund industry is set to shrink in 2012 after an year in which growth stagnated, performance faltered and managers struggled to raise capital. There were 123 Asian hedge funds that closed in the first 10 months of 2011 compared with 125 in all of 2010 and a record 184 in 2008 when the collapse of Lehman Brothers Holding Inc roiled markets.

· The main trade unions in the country are calling for nationwide strikes, mass protests and demonstrations to include oil production, air ports, sea ports, fuel stations, markets and banks starting from Monday 9th January if the Government fails to reverse the removal of the fuel subsidy.

· Bonds – Markets are still illiquid on the back of the slow down at year end and yet to get going in 2012. The shock removal of the fuel subsidy and the uncertainty around it is also making trading and expectation of inflation and rate direction difficult.

· Bills – Markets are still illiquid on the back of the slow down at year end and yet to get going in 2012. The CBN came out to mop up liquidity offering N100bio in 36 day OMO bills. They only sold N11.92bio though subscription was as high as N236bio.

· Money Market –
OBB & unsecured rates O/N 13.00% & 14.00% respectively, the market is still quite liquid. Expectation is that the CBN will likely continue to mop up some of this liquidity.

· WDAS Auction:
CBN offered and sold $300mio, lowest successful bid was at 158.2771 [inc. 1 commission], 1 point depreciation against last year’s close. Weighted average 158.6205 [inc. 1% commission]

                           Hi               Low           Close         Prev.Close
USD/NGN 160.35/45     159.25/35   159.45/55    160.06/16

NIBOR(%)                              LIBOR (%)
O/N               13.7500            USD 1 month            0.2953
7 Day             14.3330            USD 2 month           0.4282
30 Day          15.2920            USD 3 month           0.5825
60 Day          15.7920            USD 6 month           0.8110
90 Day          16.1670            USD 12 month          1.1304
Y/Y Consumer Inflation Nov 2011 :                         10.50%
FX Reserves: 29 December 2011               (USD bn) 32.89
MPR                                                                              12.00%
Source: FMD and CBN

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