A Review of the Nigerian Energy Industry

Financial market update

14 November 2012, Sweetcrude, Lagos – Local and international financial market update.
Nigeria – Lagos state started a process to gauge investor interest in its proposed seven year NGN80 billion bond sale. Coupon guidance has been given at 12.75% to 14.00% with order requests closing on Nov 19 according to the sales lead book runner. The proceeds from the sale are to be used to fund infrastructure projects including an urban rail line. Lagos state first issued debt in 2008 when it sold NGN50 billion of five year securities with a 13% coupon followed by a NGN50 billion issue in April 2010 with a coupon of 10%

Europe – ECB president Vitor Constancio said a common bank supervisor under its control would need to power over all euro area institutions countering German’s push to limit central oversight to systemically important firms. Setting up a common supervisor is supposed to open doors for the euro area firewall fund to offer direct aid to banks

USA – US Treasury yields show inflation expectations fell to a two month low amid concerns the US economic growth will slow as the nation grapples with how to avoid the so called fiscal cliff of spending cuts and tax increases due to take effect in January 2013. US ten year notes are yielding 1.60%. The fiscal cliff referrers to a standoff between the president (democrat) and congress (controlled by the republican) about how to curb soaring US debt through a mix of tax code changes and reduction in federal spending. Without legislation, a combined USD607 billion in tax increases and spending cuts will begin in January.

China – A congressional advisory panel in the US on Wednesday urged tighter screening of investments by Chinese state owned companies in the US stating they present unfair competition to American Firms. The US government is still weighing the benefits of what may be considered short term job creation in the US against the longer term economic costs Chinese state owned direct investment may bring.

Bonds – Relatively stable market yesterday with yields inching downward.

Bills – Yields dipped across board as the excess liquidity in the markets put downward pressure on yields across all the maturities. The longer date maturities which had been largely untouched became the focus of most of the day’s trading as yields dipped an average 40bps

Money Market – OBB and unsecured O/N rates closed yesterday at 11.75% & 12.00% respectively.

Indicative Currency Exchange Rates
Bid              Offer

EURUSD          1.2720            1.2730
GBPUSD          1.5881             1.5891
USDJPY           79.50              79.90
USDCHF          0.9462           0.9482
GBPEUR          1.2484            1.2494
USDZAR          8.7555            8.8555
USDNGN         157.80            158.30
JPYNGN          1.9849            2.0349
CHFNGN        166.77              170.77
EURNGN        200.72            204.72
GBPNGN         250.60           254.60
ZARNGN         18.02             20.02

Both futures settled lower yesterday with WTI slid to $85.24/bbl (-$0.14) and Brent to $107.99/bbl (-$0.27) and the WTI-Brent premium was at $22.75. Futures were traded near one-week lower amidst forecast report showing US stockpiles rising to the highest level since July after IEA cuts its demand forecasts for 2013 to 90.4mmbls.

Interest rates
NIBOR (%)                       LIBOR (%)

O/N              12.1250           USD 1 month            0.2080
7 Day            13.0417           USD 2 month           0.2590
30 Day         14.4667           USD 3 month           0.3100
60 Day         15.1450           USD 6 month           0.5240
90 Day         15.4417            USD 12 month         0.8615
Y/Y Consumer Inflation September 2012 :           11.3%
FX Reserves: 11 November 2012 (USD bn)          42.72
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   157.97/07  157.55/65  157.70/80  157.35/45

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