A Review of the Nigerian Energy Industry

Financial market update

19 November 2012, Sweetcrude, Lagos – Local and international financial market update.
Nigeria – Nigeria’s credit ratings may be cut if the country raises its proposed oil benchmark price and fails to increase its savings, President Goodluck Jonathan said. The Cabinet has proposed an oil price of USD75 a barrel for its 2013 budget. Nigeria’s house of representatives is seeking a price of USD80 per barrel while the senate wants USD78 per barrel. Government relies on oil revenues for 80% of its income and 90% of foreign currency income.

Europe – EU finance ministers aim to stitch together Greece’s next payment this week. With tens of thousands of Europeans staging protests last week against austerity measures and unemployment, shifting dynamics in other EU countries could foreshadow renewed conflict, an early election in Italy, a regional vote in Spain and an approaching bail out package for Cyprus.

USA – Brazil, Belgium, Luxembourg, Russian, Switzerland, Taiwan and Hong Kong, boosted their holdings of US government securities by a collective $264.8 billion since the last debt ceiling debate ended in August 2011. The purchases more than made up for the $123 billion decline in Treasuries owned by China, Americas biggest overseas creditor to $1.56 trillion.

India – India’s interest rate swaps were near their lowest levels this month on speculation slowing inflation and economic growth will prompt the central bank to cut interest rates. The WPI rose 7.45% in October YOY, the least since February. Industrial out put dropped 0.4% in September after a revised 2.3% gain in August. The deceleration in inflation and a drop in economic activity is expected to spur some monetary easing.

Bonds – Light demand across the curve to close last Friday. Still some room for yields down south. Takers market it is for now.

Bills – OMO announcement reduced expected demand in the secondary market due to yield spread accessible in both markets. Outlook remains bullish into the new week.

Money Market – OBB and O/N rate trend back up to 12.25% and 12.50%, this is due to OMO issuance on Friday to sterilize liquidity levels after an inflow of a matured t-bill on Thursday.

MPC meeting – holds 19th – 20th November 2012, we expect a hold on all monetary policy tools i.e MPR,CRR,LR.

Indicative Currency Exchange Rates
                               Bid            Offer
EURUSD             1.2761           1.2771
GBPUSD              1.5918          1.5928
USDJPY               81.16             81.56
USDCHF              0.9445         0.9465
GBPEUR              1.2472          1.2482
USDZAR              8.8485         8.9485
USDNGN             158.00          158.50
JPYNGN              1.9468           1.9968
CHFNGN             167.28           171.28
EURNGN             201.62           205.62
GBPNGN              251.50          255.50
ZARNGN              17.86            19.86
1.2761          1.2771

Escalation of tensions in the Middle East continues to drive oil prices higher as WTI settled at $87.68/bbl (+$0.76) and Brent to $109.57 (+$0.62). Front month
WTI prices are down 11% YTD, while WTI-Brent benchmark narrows to $21.97.

Interest rates
NIBOR (%)                    LIBOR (%)

O/N              12.0833       USD 1 month            0.2075
7 Day            13.1250        USD 2 month           0.2570
30 Day         13.8333        USD 3 month           0.3115
60 Day         14.2500        USD 6 month          0.6975
90 Day         15.0000       USD 12 month         0.8600
Y/Y Consumer Inflation September 2012 :       11.3%
FX Reserves: 9 November 2012 (USD bn)        42.91
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  158.50/60   157.95/05   158.45/55   157.95/05

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