A Review of the Nigerian Energy Industry

Financial market update

13 August 2012, Sweetcrude, Lagos – Local and international financial market update
EUR: the Euro nudged higher against the dollar, helped by hopes that the European Central bank will soon take action to ease the euro zones sovereign debt crisis.

GBP: Sterling edged lower as weak Chinese Economic data cooled appetite for perceived riskier currencies, although the Bank of England’s signal this week that it would not cut interest rates was expected to help limit losses.

ZAR: South Africa’s rand hovered near the previous day’s 13- week high after hitting historical lows in July when dovish central bank comments on the domestic economic and inflation outlook led the market to price in another rate cut.

Nigerian Bonds – Nigeria plans to raise over 75 billion naira in local bonds with maturities of between five and 10 years at its regular auction on Aug. 15.

Nigerian Bills – Stable trading session across board on Friday with light demand recorded on the long-tenured bills. Direction in the bills market is now largely dependent on liquidity levels in the cash market and as such still expect sustained volatility in the new week.

Nigerian Money Market – The Nigerian interbank lending rate eased to an average of 15.83%, two days after the overnight borrowing rate hit a more than 2- year high of 35% on the back of central bank measures to tighten liquidity. The cost of borrowing among banks was however, higher than the 17% on average it closed last week.

Ratings agency, Agusto & Co upgraded the country’s banking sector on Thursday by one notch to Bbb from Bb with a stable outlook, citing improved earnings and capital ratios. In a ratings report on Nigerian Banks, the agency said credit growth was gradually returning and risk aversion waning as banks recovered from the shock of a N620 billion bailout in 2009. It said the upgrade was based on the banks financial condition and their capacity to meet their obligations.

                          Hi                 Low              Close       Prev.Close
USD/NGN  159.20/30     159.05/15    158.25/35    158.60/70

Interest rates

NIBOR (%)                      LIBOR (%)
O/N               25.0000        USD 1 month          0.2398
7 Day             26.2500         USD 2 month         0.3333
30 Day          26.7500          USD 3 month         0.4370
60 Day          27.3333          USD 4 month         0.5399
90 Day          27.7083          USD 6 month         0.7202
USD 12 month        1.0465
Y/Y Consumer Inflation June 2012 :                    12.9%
FX Reserves: 09 August 2012 (USD bn)              36.465
MPR                                                                             12.00%

Source: Reuters, Bloomberg, Central Bank of Nigeria, Financial Market, Dealers Association Standard Chartered Bank Nigeria, Business day, Standard Chartered Bank Nigeria.

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