Financial market update

30 July 2012, Sweetcrude, Lagos – Local and international financial market update.
NIGERIA: New capital rules may hinder Nigerian banks expansion plans, as the Central Bank limits how financial institutions use local funds abroad and other African countries tighten requirements for foreign lenders.

The interbank lending rate fell to an average of 14.08 percent and has now fallen more than 300 basis points as liquidity increased, reversing a jump after the central bank announced on Tuesday it was raising banks Cash Reserve Requirements.

EUROPE: The euro rose to a three-week high against the greenback after German Chancellor Angela Merkel and French President Francois Hollande said they’ll do “everything” necessary to protect the single currency. The euro strengthened 0.6 percent to $1.2355 at 1:07 p.m. New York time on Friday and touched $1.2377, its highest since July 6.

US: The world’s largest economy cooled in the second quarter as limited job growth prompted Americans to curb spending while state and local governments cut back. Gross domestic product, the value of all goods and services produced, rose at a 1.5 percent annual rate after a revised 2 percent gain in the prior quarter, Commerce Department data showed Friday in Washington. Household purchases, which account for about 70 percent of GDP, grew at the slowest pace in a year.

CHINA: China’s banking regulator said it will “decisively” enforce the government’s property curbs in the second half of this year and enhance risk management of real estate lending. The China Banking Regulatory Commission will seek to “more effectively” support stable economic growth, according to a statement on its website today. The watchdog pledged to boost lending to key construction projects, small businesses and affordable housing.

Bonds – 20yr 10.00% FGN JUL2030 traded down 26bps to 14.23 percent yield due to some demand, this is clearly liquidity play on existing tradeable stock just at a time when monetary policy tools points to an upward shift across the yield curve.

Bills – Flat session on yields on Friday but marked by intraday volatility due to OMO auction announcement, initial reaction was a sell-off which corrected after result announcement and lower volume sold, volatile week ahead as we still hold views of an upward movement on yields.

Money Market – Lending rates eases further down 50bps on OBB to 13.50% and 25bps on O/N rate to 14.00% to close a volatile week, cash market is fairly liquid from the excess inflow of ngn100 bio yesterday even though an OMO auction was conducted but just ngn7.3 bio sold out of an offering of NGN 70 bio.

                             Hi                  Low             Close           Prev.Close
USD/NGN     161.29/39    161.25/35    160.25/35    160.50/60

NIBOR (%)                       LIBOR (%)
O/N                14.0833         USD 1 month         0.2457
7 Day              14.4167          USD 2 month         0.3393
30 Day           14.9583         USD 3 month         0.4466
60 Day           15.1667          USD 4 month         0.5501
90 Day           15.5417          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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