A Review of the Nigerian Energy Industry

Financial market update

Financial markets07 August 2013, Sweetcrude, Lagos – Local and international financial market products and services update.
NIGERIA: The International Finance Corporation is working with Nigeria’s SEC to start a long-term, local-currency bond program that will allow it to issue the equivalent of as much as $1 billion of debt. The Washington-based lender wants to issue more naira bonds to “deepen domestic capital markets and support private-sector development”. The IFC sold its first Nigerian local-currency bonds in February, raising 12 billion naira ($75 million) after investor demand was more than double the initial offering. The lender has a committed portfolio of $1.5 billion in Nigeria, its largest on the continent and eighth-biggest worldwide.

US: U.S. stocks fell for a second day as retailers posted results that disappointed investors while trade data fuelled concerns that the Federal Reserve may begin to reduce its bond purchases this year.

EUROPE: The U.K. economy is showing signs of gaining traction, expanding 0.6 percent in the second quarter with manufacturing and construction and services all strengthening in July and house-prices rising. Bank of England Governor will tomorrow present the Central Bank’s new economic forecasts as well as officials’ assessment of using forward guidance.

CHINA: Slowing capital inflows are starving China’s financial system of cash, prompting analysts to predict that lenders’ reserve requirements will be relaxed for the first time since May 2012. The People’s Bank of China is seeking to limit borrowing costs as economists predict the slowest growth in 23 years. The PBOC plans to use money-market operations and tools including reserve requirements to help stabilize rates, according to a quarterly monetary policy report released on Aug. 2.

INDIA: Indian government bonds recovered all losses to end flat on Tuesday on speculation that the government will take more steps to narrow the country’s current account deficit after the rupee hit a record low. The benchmark 10-year bond yield ended flat yesterday at 8.20 percent after earlier rising to as much as 8.30 percent. Total volumes were less than normal at 152.45 billion rupees.

BONDS: Bullish markets yesterday caught most players by surprise though the origin of the move was linked to some interest in the fairly illiquid 2015s, this sentiment spread across the whole curve with yields dipping about 16bps on average.

BILLS: Bullish trend in markets yesterday, as some market participants took a view that rates will not spike as expected on the back of the CRR debits. Rates came off about 60 bps on the short dated maturities and about 25bps on average on the longer dated maturities.

MONEY MARKET: OBB and unsecured O/N rates inched up to 11.00 and 11.25% ahead of the CRR debits today. The markets however remained liquid, opening up N786billion yesterday.

Indicative Currency Exchange Rates
Bid Offer

EURUSD 1.3306 1.3316
GBPUSD 1.5337 1.5347
USDJPY 97.07 97.47
USDCHF 0.9255 0.9275
GBPEUR 1.1526 1.1536
USDZAR 9.9300 10.0300
USDNGN 159.51 160.01
JPYNGN 1.6432 1.6932
CHFNGN 172.35 176.35
EURNGN 212.24 216.24
GBPNGN 244.64 248.64
ZARNGN 16.06 18.06

WTI swung between gains and losses before U.S. government data forecast to show crude inventories fell to a six-month low in the country. Futures fluctuated after rising as much as 0.4 percent in New York. Prices slid 2.4 percent the past three days. WTI for September delivery was at $105.29 a barrel in electronic trading on the New York Mercantile Exchange, down 1 cent.

Interest rates
NIBOR (%)                       LIBOR (%)

O/N             11.2500            USD 1 month        0.1850
7 Day           12.0417            USD 2 month        0.2270
30 Day        12.3333            USD 3 month        0.2664
60 Day       12.6250            USD 6 month         0.3955
90 Day       12.9167            USD 12 month       0.6654
Y/Y Consumer Inflation June 2013 :     8.4%
FX Reserves: 17 July 2013 (USD bn)     46.923
MPR                                                              12.00%
Source: FMD and CBN
Source: Reuters, Bloomberg, Central Bank of Nigeria, Financial Market Dealers Association Standard Chartered Bank Nigeria.

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