A Review of the Nigerian Energy Industry

Financial market update

Financial-market13 August 2013, Sweetcrude, Lagos – Local and international financial market products and services update.
US: Junk rated borrowers are moving quickly to the market to lock in funding before the impending slowdown and potential jump in rates. Four borrowers forged ahead with a total of USD 1.75bn of deals priced today, taking August volumes to USD10.6bn – more than 60 percent down on last year’s pace for the same period.

EUROPE: German Chancellor Angela Merkel’s government expects to cut planned 2014 bond sales, predicting increased tax collections and reduced spending will help keep its budget balanced, a draft federal spending plan shows. The draft indicated that Germany plans to sell 216.5 billion Euros ($287 billion) of bonds in 2014 compared with 240 billion Euros this year. This includes 107.6 billion Euros of bonds with a maturity of at least four years, compared with 114.5 billion Euros this year. Additionally, Sales of debt with a maturity less than four years, including bills, will be cut to 108.9 billion Euros from 125.6 billion Euros. The provisional sales program also sets a spending ceiling of 295.4 billion Euros against expected outlays this year of 310 billion Euros.

CHINA: Yuan forwards dropped for a second day after the central bank weakened the currency’s reference rate for the first time in more than a week as the dollar extended gains against some of the world’s major currencies. The People’s Bank of China cut the daily fixing 0.06 percent to 6.1705 against the U.S. currency, ending the longest run of increases since November. The PBOC will add funds to the financial system by auctioning 11 billion Yuan ($1.8 billion) of seven-day reverse-repurchase agreements today, according to a trader at a primary dealer.

INDIA: India’s consumer-price index rose 9.64 percent in July, official data showed yesterday, compared with 6.3 percent in Brazil, 6.5 percent in Russia and 2.7 percent in China. The interbank overnight call money rate closed at 10.25 percent yesterday, the highest since March 2012, after the central bank tightened cash-supply to support the currency.

BONDS: Bullish markets today across board as the realisation that funding levels are not likely to skyrocket become apparent. Yields have retraced in the last couple of sessions to close lower today than levels preceding the increased CRR announcement.

BILLS: Also bullish in the bill markets as the primary auction levels came out surprisingly lower than expectation across board. With the CBN ceasing to offer OMO bills supply has effectively reduced and the demand is pushing hard into the primary and secondary markets.

MONEY MARKET: OBB and unsecured O/N rates came lower yesterday to average about 14.00% as market opened net Square. Funding for WDAS comes today and it is likely we see the spike in rates as this limits the CBN discount window use. Approximately N138billion is maturing in OMO bills which will help ease liquidity.

CBN WDAS AUCTION: CBN offered $300mio and sold $221.57mio, lowest intervention rate is 157.3075 (1% commission inclusive) . 18 banks bid.

Indicative Currency Exchange Rates
Bid       Offer

EURUSD     1.3309      1.3319
GBPUSD     1.5462       1.5472
USDJPY       97.44        97.84
USDCHF     0.9261      0.9281
GBPEUR     1.1618       1.1628
USDZAR     9.8900     9.9900
USDNGN    160.57      161.07
JPYNGN      1.6479      1.6979
CHFNGN     173.38     177.38
EURNGN     213.70     217.70
GBPNGN      248.27    252.27
ZARNGN      16.24       18.24

WTI crude traded near the highest price in five days amid speculation that U.S stockpiles fell for the sixth time in seven weeks as summer driving buoyed demand. WTI for September delivery was at $106.25 a barrel in electronic trading on the New York Mercantile Exchange, up 14 cents. The volume of all futures traded was 26 percent below the 100-day average. Prices have climbed 16 percent this year.

Interest rates
NIBOR (%)                         LIBOR (%)

O/N              14.7500             USD 1 month         0.1846
7 Day            15.0000            USD 2 month         0.2267
30 Day         15.2500             USD 3 month         0.2647
60 Day         15.5000             USD 6 month         0.3955
90 Day         15.7500             USD 12 month        0.6651
Y/Y Consumer Inflation June 2013 :          8.4%
FX Reserves: 17 July 2013 (USD bn)        46.923
MPR                                                                 12.00%
Source: Reuters, Bloomberg, Central Bank of Nigeria, Financial Market
Dealers Association Standard Chartered Bank Nigeria.
                              Hi                 Low        Close       Prev.Close
USD/NGN   160.57/67    160.05/15   160.57/67   160.01/11

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