A Review of the Nigerian Energy Industry

Financial market update

Financial-market09 July 2013, Sweetcrude, Lagos – Local and international financial market products and services update.
NIGERIA: Nigeria has repaid $1.4 billion in mostly overdue debts to fuel traders after raising the money via an oil prepayment loan from international lenders, successfully concluding some of the most painful and lengthy debt talks in its history. The $1.4 billion repayment, which follows a smaller payment to creditors of $400 million earlier this year, will allow the country to halve its fuel debts to $1.7 billion, sources at three trading companies told Reuters. It will ease the threat of large write-downs for big trading houses, oil firms and Nigerian banks, as well as lowering the risk of insurance claims and legal action from traders, bankers and insurers against the Nigerian National Petroleum Corporation (NNPC). Had Nigeria defaulted on these loans it could have restricted the future borrowing capacity of Africa’s second largest economy just as it was preparing to issue a $1 billion Eurobond

EUROPE: European Central Bank President Mario Draghi reiterated the bank’s vow to keep interest rates at record lows but said it remained to be seen whether the unprecedented move last week would be sufficient. The ECB’s move to give guidance on its expectations for the course of monetary policy was driven by market volatility, which took hold after the U.S. Federal Reserve last month set out a plan to begin slowing its stimulus. Abandoning its traditional policy of never pre-committing on future rates, the ECB said last Thursday it would keep its interest rates at present or record lows for an extended period – its first, tentative use of so-called ‘forward guidance’.

CHINA: China’s inflation remained below the government’s target in June, while the decline in factory-gate prices extended its longest streak in a decade amid overcapacity and lower commodity costs.

BONDS: Bond market remains calm with low trading volumes, yields traded 5 – 15bps up in yesterday’s session sustaining the trend from the previous week, offshore accounts remain quiet in the market though current levels of 13.65% – 13.90% becoming a new traded range for the yield curve.

BILLS: Bill yields traded 10 – 15bps due to selling interests after another OMO auction announcement at the start of the week. CBN sold nothing at yesterday’s auction, demand however remains weak irrespective of the auction outcome, there will be a primary auction later in the week expected to boost supply into the market.

MONEY MARKET: OBB and ON rate maintained at 10.15% and 10.25%.

COMMODITIES: WTI oil swung between gains and losses as a technical indicator showed last week’s rally may be unsustainable. U.S. crude inventories were forecast to fall for a second week while bloodshed in Egypt stoked concern that Middle East supplies may be disrupted. WTI for August delivery was at $103.30 a barrel in electronic trading on the New York Mercantile Exchange, up 16 cents, at 3:03 p.m. Singapore time.

Indicative Currency Exchange Rates
Bid          Offer

EURUSD       1.2874        1.2884
GBPUSD        1.4956        1.4966
USDJPY        101.13          101.53
USDCHF       0.9663        0.9683
GBPEUR       1.1617          1.1627
USDZAR        10.0900     10.1900
USDNGN       161.20        161.70
JPYNGN        1.5940        1.6440
CHFNGN       166.82        170.82
EURNGN        207.53       211.53
GBPNGN        241.09       245.09
ZARNGN        15.98          17.98

Commodities
WTI oil swung between gains and losses as a technical indicator showed last week’s rally may be unsustainable. U.S. crude inventories were forecast to fall for a second week while bloodshed in Egypt stoked concern that Middle East supplies may be disrupted. WTI for August delivery was at $103.30 a barrel in electronic trading on the New York Mercantile Exchange, up 16 cents, at 3:03 p.m. Singapore time.

Interest rates
NIBOR (%)                        LIBOR (%)

O/N              10.3750            USD 1 month         0.1927
7 Day            10.7083            USD 2 month        0.2355
30 Day         10.9500            USD 3 month        0.2686
60 Day         11.2080            USD 4 month         0.3126
90 Day         11.4500            USD 6 month        0.4104
USD 12 month      0.6941
Y/Y Consumer Inflation April 2013 :               9.0%
FX Reserves: 02 July 2013 (USD bn)              47.423
MPR                                                                        12.00%
Source: FMD and CBN
Source: Reuters, Bloomberg, Central Bank of Nigeria, Financial Market Dealers Association Standard Chartered Bank Nigeria.

Fx
Hi               Low           Close        Prev.Close
USD/NGN
    161.75/85   160.70/80   161.70/80   160.70/80

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