A Review of the Nigerian Energy Industry

Financial market update

31 October 2012, Sweetcrude, Lagos – Local and international financial market update.
Nigeria – The National Council on Privatisation approved the next steps for the conclusion of the privatisation of the generation and distribution companies, specifying that each highest ranked bidder for a generation or distribution company is required to post an additional bid security (“Preferred Bidder’s Bank Guarantee”) in the form of a Letter of Credit or Bank Guarantee for 15 per cent of the transaction value within 15 business days of notification from the Bureau of Public Enterprises

India – Indian stocks swung between gains and losses as concerns inflation may accelerate outweighed expectations policy makers will be able to boost growth. The RBI forecast yesterday that inflation may rise to 8% by December before easing to 7.5% in the quarter ending March 2013. They have also indicated that there is a “reasonable likelihood” of easing rates in the first quarter of 2013 as inflation cools.

China – Luxury companies are betting that Chinese shoppers who are buying fewer gold bars and lavish gifts for their business dealings will loosen the purse strings after a once a decade government change in Beijing. The leadership transition beginning Nov 8, will clear uncertainty on political appointees and economic policy. Greater China’s luxury market is estimated at USD35 billion, according to Bain & Co.

US – Corporate bond sales surged to USD3.3 trillion this year, challenging the record in 2009, as investors sought higher yielding alternatives to government securities and companies took advantage of borrowing costs at all time lows.

Bonds – Some intraday volatility yesterday but still no large ticket trades and relatively low volumes through the day.

Bills – Some demand feeding into the market yesterday but still concentrated in the short to medium term tenors. Rates down an average 15bps across the maturities. In the absence of any auctions this week, we will likely see rates dip a possible further 10-15bps until the sell off ahead of the auction next week.

Money Market – OBB and unsecured O/N rates at 12.00% & 12.50% to close on Tuesday.

Indicative Currency Exchange Rates
Bid          Offer

EURUSD                1.2923          1.2933
GBPUSD                 1.6047          1.6057
USDJPY                  79.48            79.88
USDCHF                0.9350          0.9370
GBPEUR                1.2417            1.2427
USDZAR                8.6530           8.7530
USDNGN               156.95           157.45
JPYNGN                1.9747            2.0247
CHFNGN               167.86           171.86
EURNGN              202.83           206.83
GBPNGN              251.86            255.86
ZARNGN              18.14              20.14

Oil rose from the lowest levels in almost four months in New York on speculation that demand will soon rebound after Atlantic super storm Sandy made landfall. Most of the refineries should soon be back to normal operations which will increase demand for crude.

Interest rates
NIBOR (%)                              LIBOR (%)
O/N                12.2083               USD 1 month         0.2120
7 Day              12.9583               USD 2 month         0.2610
30 Day           14.8333               USD 3 month         0.3128
60 Day           15.5417                USD 6 month         0.5399
90 Day           16.0417                USD 12 month       0.8775
Y/Y Consumer Inflation September 2012 :               11.3%
FX Reserves: 23 October 2012 (USD bn)                  42.27
MPR                                                                                   12.00%
Source: Reuters Guardian, Bloomberg, Central Bank of Nigeria,
Financial Market Dealers Association Standard Chartered Bank Nigeria

                           Hi                Low         Close      Prev.Close
USD/NGN  157.05/15   156.80/90  156.97/07  157.23/33

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