A Review of the Nigerian Energy Industry

Financial market update

27 July 2012, Sweetcrude, Lagos – Local and international financial market update.
NIGERIA: Royal Dutch Shell Plc, operator of Nigeria’s largest oil fields, agreed to invest about $4 billion with its partners in two oil and gas projects in the country. The Shell Petroleum Development Co. of Nigeria, which Shell operates as a venture with Eni SpA, Total SA and the government, will develop the Forcados-Yokri project and the Southern Swamp associated gas gathering project, the company said yesterday in a statement. The projects are expected to pump 100,000 barrels and 85,000 barrels of oil equivalent a day at peak, respectively. Shell, based in The Hague, last month said it planned to invest about $3.5 billion in a natural-gas project in Imo state in the southeast. It is working on 17 gas projects in Nigeria, set to cost a total of $6 billion, according to the company.

EUROPE: European Central Bank President Mario Draghi said policy makers will do whatever is needed to preserve the euro, suggesting they may intervene in bond markets as surging yields in Spain and Italy threaten the existence of the 17-nation currency bloc. Spanish yields slumped after Draghi’s remarks, with the rate on the 10-year bond dropping as much as 39 basis points to 6.91 percent. It touched a record 7.69 percent earlier this week. The euro jumped and stocks rose. The single currency climbed as high as $1.2318 after trading at $1.2118 before Draghi spoke. The Stoxx Europe 600 Index gained 2 percent.

CHINA: China’s stocks fell to the lowest level since March 2009 as speculation the government will maintain real-estate curbs overshadowed a State Council plan to develop the nation’s central provinces. The Shanghai Composite Index dropped 0.5 percent to 2,126 at the close yesterday, erasing a 0.5 percent gain. The CSI 300 Index lost 0.5 percent to 2,347.49. The Shanghai index has fallen 14 percent from this year’s high on March 2 amid concern the economic slowdown is deepening.

Bonds – Bond yields also reacted to the stop rates on bills with yields coming off across the curve from Wednesday’s level, the 20yr however corrected upwards in yesterday’s session after an illiquid run on Wednesday. Yields still expected higher across the curve as direction recorded yesterday is not sustainable considering the new lending levels.

Bills – Demand returns on bills due to lower cut-off rates at the auction, this just further affirms the demand for Nigerian bills given its yield return and low risk profile.

Money Market – OBB off 200bps to 14.00% and 325bps on O/N rate to 14.25%, FAAC funds have been disbursed on time to ease the impact of withdrawal to adjust for the new cash reserve requirement.

                            Hi                 Low          Close       Prev.Close
USD/NGN   160.98/08    159.15/25   160.70/80   160.68/78

NIBOR (%)                            LIBOR (%)
O/N               14.6250               USD 1 month             0.2452
7 Day             15.1667                USD 2 month             0.3388
30 Day          15.5417                USD 3 month             0.4471
60 Day          15.9167                USD 4 month             0.5491
90 Day          16.3750               USD 6 month             0.7244
USD 12 month            1.0605
Y/Y Consumer Inflation June 2012 :                            12.9%
FX Reserves: 25 July 2012 (USD bn)                            36.403
MPR                                                                                     12.00%
Source: FMD and CBN

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