A Review of the Nigerian Energy Industry

Financial market update

06 January 2012, Sweetcrude, Lagos – Local and international financial market update.
· EUROPE : Covered bond sales (securities backed by assets) are accelerating in Europe as the lack of alternative financing prompts banks facing USD1 trillion of maturing debt to pledge their best assets to raise money. Societe Generale, Barclays and other banks have sold EUR 15.2 billion of covered bonds this year

· INDIA: Kingfisher Airlines, dropped most in three weeks after being asked to submit a “firm” recovery plan to the nation’s aviation regulator next week. The airline sought new funds after posting losses totalling about INR 47 billion over the past three fiscal years. Indian carries have struggled to turn surging demand into profits because of price wars, completion from state owned airlines and the falling INR.

· ASIA: Asian stocks fell and the regional benchmark index pared weekly against as higher borrowing costs in a French Bond auction yesterday stoked concern Europe’s debt crisis is deepening, overshadowing improving economic data in the US.

· The AMCON Wednesday declared its preparedness to commence the recovery of a total of N3.14 trillion bad debts it acquired from banks this year. The corporation has warned all its debtors and other obligors to pay up, even as it threatened to deploy its statutory powers to recover all the debts with the accrued interests. AMCON also warned the debtors and other connected obligors “to disabuse their minds of any erroneous notions that such debt obligations will not be vigorously pursued and enforced by the corporation”.

· Bonds – The markets have started trading lightly, most of the activity though quite small was centered around the April 2015 and Jul 2030 issues. Trend is bearish in the face of rising inflation due to the removal of the fuel subsidy and the expectation that the MPC might raise the benchmark rate later this month.

· Bills – The CBN has offered another N100bio in 120 and 169day bills to try and mop up some of the excess liquidity. Secondary market activity is picking up slowly with rates up about 60bps across some maturities. Trading is still very patchy and a lot of investors are taking advantage of the frequent OMO offers to get higher yields.

· Money Market – OBB & unsecured rates O/N 13.00% & 13.50% respectively, the market is still liquid. Expectation is that the CBN will likely continue to mop up some of this liquidity through OMO bill offerings.

                           Hi                 Low             Close             Prev.Close
USD/NGN   160.20/30     159.43/53    159.85/95    159.45/55

NIBOR(%)                             LIBOR (%)
O/N               13.4167            USD 1 month        0.2953
7 Day             14.0417           USD 2 month        0.4292
30 Day          15.1250           USD 3 month        0.5825
60 Day          15.7083          USD 6 month        0.8120
90 Day          16.1250           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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