A Review of the Nigerian Energy Industry

Financial market update

24 July 2012, Sweetcrude, Lagos – Local and international financial market update.
NIGERIA: THE Securities and Exchange Commission (SEC), in collaboration with Fund Managers Association of Nigeria (FMAN), has concluded arrangement to unveil an all encompassing strategic plan aimed at expanding the reach of Collective Investment Scheme (CIS). Under the arrangement, the strategy document will project expected growth in assets under the management over the next few years. The document will also incorporate innovations into the market such as introduction of incentives to attract retail investors back into the market.

EUROPE: Europe was plunged into fresh market turmoil as the first call for bailout aid by a Spanish region sent borrowing costs surging, while Spain and Italy reinstated a ban on betting on stock declines. The euro slipped below its lifetime average against the U.S. dollar and to the lowest level in more than 11 years against the yen yesterday, dropping to $1.2080 at 2:41 p.m. in Frankfurt. Spain’s 10-year bond yields rose as high as to 7.57 percent.

KENYA: Kenya is set to benefit from new energy, communication and road infrastructure projects after Prime Minister Raila Odinga signed various cooperation agreements with Chinese firms while visiting that country. A solar and diesel engine power plant will be set up in at a yet to be disclosed region in the country after the PM signed a deal on behalf of the Kenyan government with China Jiangxi Corporation for International Economic and Technical Cooperation.

Bonds – Volatility persists in the market still riding on the renewed interest for bonds recorded in the last few session, at this time yields are trading around 16.00% levels on the 5yr – 10yr bond maturities with some light demand feeding into this area of the curve yesterday.

Bills – Profit taking moves witnessed in Monday’s session, yields up 10 – 15bps on most traded securities and flat on others which tried to resist the move. MPC meeting expected to end today.

Money Market – OBB and O/N rate up 75bps respectively to 14.75% and 15.50% as liquidity level starts to drop in the cash market.

Offered: 300mio
Sold: 300mio
Marginal rate: 155.89
Weighted average: 155.91
No. of Banks: 19

Hi                  Low               Close             Prev.Close
USD/NGN  161.55/65   160.99/09   161.00/10   161.30/40

NIBOR (%)                     LIBOR (%)
O/N                 15.3333    USD 1 month      0.2462
7 Day              15.6250    USD 2 month     0.3383
30 Day           15.8750    USD 3 month     0.4511
60 Day           16.1250     USD 4 month     0.5501
90 Day           16.3750    USD 6 month      0.7274
USD 12 month    1.0630
Y/Y Consumer Inflation June 2012 :         12.9%
FX Reserves: 19 July 2012 (USD bn)           36.371
MPR                                                                           12.00%
Source: FMD and CBN

Today’s MPC meeting:

– Nigeria’s Central Banks say slowdown in global economy will have significant impact on the Nigerian Economy.

– Concerned by slowing growth in agriculture sector due to security challenges.

– Nigeria’s Central Banks say they are concerned about Fiscal leakages, Oil theft, Lower oil production.

– Downside risk to economic growth from lower oil prices, security problems.

– Higher borrowing by Government, rising electricity prices risk to higher inflation.

– Nigeria monetary policy committee urged Central Bank of Nigeria to maintain policies to support the local currency (Naira).

– Nigeria does not have oil savings to protect it from oil price shocks, risk to naira.

– Nigeria Central Bank says lowering interest rate would weaken naira, reduce much needed reserves.

– Nigeria’s MPC recognizes impact of high rate on Businesses.

– Nigerian Monetary Policy committee leaves benchmark interest rate unchanged at 12%,

– Nigerian Monetary Policy committee maintains the deposit/lending rate corridor of +/- 200 BPs around benchmark rate.

– Nigerian Monetary Policy committee Increase the cash reserve requirement from 8% to 12%

– Nigerian Monetary Policy committee have reduced the Net Foreign Exchange Position from 3% to 1%

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