A Review of the Nigerian Energy Industry

Financial market update

02 November 2012, Sweetcrude, Lagos – Local and international financial market update.
Nigeria – Nigeria may shut down oil fields as it tries to clamp down on gas flaring, even if it means a loss of revenue, the petroleum industry’s chief regulator said on Wednesday. Africa’s top oil producer and holder of the world’s seventh largest natural gas reserves is considered to be among the top two gas flarers in the world, burning off unwanted gas, after Russia. One of the things we are doing is to do some analysis for government, to such an extent that it will even mean a proposal to shut down fields to avert huge gas flaring,

USA – Manufacturing expanded more than forecast, consumer confidence rose to a four year high and fewer Americans filled claims for unemployment benefits heading into the fourth quarter. The Institute of Supply Management’s factory to a five month high of 51.7 in October. The Conference Boards sentiment index increased to 72.2, the highest since February 2008. Applications for jobless benefits fell by 9,000 to 363,000 in the week ending Oct. 27.

India – The rupee rose for a fourth day as US employment and manufacturing data beat estimates. The rupee advanced 0.1% to 53.6350 per USD as of 10.00am today in Mumbai. Global funds pumped a net of USD2 billion into Indians stocks last month regulator data shows.

China – Forwards for Yuan are trading at the biggest discount to the spot rate in four years on bets a three month appreciation in China’s currency will reverse following next week’s US election. Both US presidential candidates Both US presidential candidates say an undervalued yuan gives China an unfair edge in trade.

Bonds – Another bullish session yesterday, yields dipping further across the curve though it appears to have hot some resistance. We might see some sell down as November ahead of the auctions.

Bills – Bullish to open in the market today with no particular large tickets fuelling the activity, this was met by profit taking especially on the longer dated maturities, leading to some correction ahead of the close.

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

Indicative Currency Exchange Rates
Bid            Offer

EURUSD        1.2934            1.2944
GBPUSD        1.6111              1.6121
USDJPY          80.23              80.63
USDCHF        0.9326            0.9346
GBPEUR        1.2456             1.2466
USDZAR        8.6355             8.7355
USDNGN       157.08             157.58
JPYNGN        1.9579              2.0079
CHFNGN       168.43             172.43
EURNGN       203.17              207.17
GBPNGN        253.07             257.07
ZARNGN         18.19               20.19

What a fall! We are not talking about Brent here, it is about the ICE gas oil nov/dec spread- from a high of about 16.75 $/mt to 2 $mt. Lacking conviction to get past the resistance, oil is trending lower but slower. Brent likely to break below the recent low of 106.70.

Interest rates
NIBOR (%)                     LIBOR (%)

O/N              12.1250          USD 1 month            0.2100
7 Day            13.0417          USD 2 month           0.2605
30 Day         14.4167          USD 3 month            0.3128
60 Day         15.0417          USD 6 month           0.5394
90 Day         15.5000         USD 12 month          0.8755
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 156.90/00  156.47/57  156.50/60  156.98/08

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