A Review of the Nigerian Energy Industry

Financial market update

04 September 2012, Sweetcrude, Lagos – Local and international financial market update.
NIGERIA: Economic growth in Nigeria, Africa’s largest oil producer, accelerated to 6.6 percent in the second quarter as farming output rose, the Central Bank of Nigeria said. Growth from a year earlier quickened from 6.2 percent in the previous three months, the Abuja-based bank said in a Aug. 29 report on its website, citing provisional data from the National Bureau of Statistics. The oil industry contracted 0.2 percent, less than the previous quarter’s 2.3 percent decline, according to the report.

EUROPE: European leaders are stepping up shuttle diplomacy this week as they brace for their central banker’s plan to defend the euro from bond-market turmoil. European Central Bank President Mario Draghi told officials yesterday he would be comfortable buying three-year government bonds to bring down borrowing costs for nations in financial distress. The stewards of the single currency, who have sparred as borrowing costs diverged in the 17 nation-euro area, have a chance to fall in line behind Draghi.

CHINA: Premier Wen Jiabao has pledged policy “fine tuning” to cope with a deepening slowdown in the world’s second-largest economy that saw export gains slump to an annual 1 percent pace in July from 11 percent in June. The deterioration in trade escalated the risk that Wen will miss his full-year economic expansion target for the first time since he took office in 2003.

INDIA: India’s rupee rose to the highest level in more than a week on speculation the European Central Bank will announce details of a new bond-purchase plan this week, spurring fund flows into emerging markets. The rupee advanced 0.2 percent to 55.4350 per dollar as of 9:25 a.m. in Mumbai, according to data compiled by Bloomberg.

Bonds – Demand on bonds sustained into the new week even at record low levels so far this year, profit taking expected anytime from now across the curve.

Bills – OMO auction announcement sent in early yesterday thereby reducing expected demand in the market, t-bill yields recorded a 30 – 40bps correction upwards due to the level of OMO rate sold on the 59dy and 66dy paper offered. Market remains liquid and as such don’t expect any further correction except another OMO auction is conducted today.

Money Market – Cash liquidity level currently at ngn225 bio after ngn42 bio worth of bills sold at today’s OMO auction. Lending rates close at 10.50% on O/N and OBB rates respectively.

CBN CUT- OFF RATE – $/NGN 155.80
No. of banks- 20

                             Hi             Low           Close          Prev.Close
USD/NGN   158.35/45   158.05/15   158.32/42     158.15/25

Interest rates
NIBOR (%)                    LIBOR (%)
O/N            10.5000     USD 1 month         0.2305
7 Day         11.5417        USD 2 month         0.3265
30 Day      13.2917        USD 3 month         0.4144
60 Day      14.0000      USD 4 month         0.5224
90 Day      14.3333       USD 6 month         0.7052
USD 12 month        1.0295
Y/Y Consumer Inflation June 2012 :           12.9%
FX Reserves: 30 August 2012 (USD bn)     38.736
MPR                                                                    12.00%

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

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