A Review of the Nigerian Energy Industry

Financial market update

Financial markets04 September 2013, Sweetcrude, Lagos – Local and international financial market products and services update.
NIGERIA: Official reserves declined by just US$200m in August to close the month at US$46.8bn. They had fallen by US$1bn the previous month, which was the consequence of the exit of some offshore fixed-income investors after the earlier remarks by Ben Bernanke on tapering, reports showed. Some of those investors have since returned to the Nigerian market on their second and third thoughts on the impact of US monetary policy. Reports state that the driver behind the US$12bn increase in the eight months to end-March was the offshore inflows and that reserves would otherwise have been broadly flat.

USA: Wall Street returned from the Labour Day long weekend in buoyant form, with support coming from fresh optimism about the global economy and another burst of corporate deal activity. However, the positive mood was tempered by lingering uncertainty over the likelihood of US military strikes in Syria – and early gains for US stocks faded by the close. Barack Obama’s decision to seek authority from Congress before taking action against Syria was seen as likely to delay any move, although comments from several US congressional leaders appeared to show growing support for the president. Evidence of the sensitivity of the markets to the Syrian situation came earlier in the session, when European stocks dipped – before partially recovering – after a US-Israeli missile test in the eastern Mediterranean was detected by Russian radar. Oil prices also rose sharply.

EUROPE: Switzerland remained the most competitive economy as the U.S. and Germany gained ground lost in recent years, the World Economic Forum said. Switzerland held the top spot for a fifth year, while Germany and the U.S. rose two slots to fourth and fifth respectively in the Geneva-based organization’s 148-nation league. Singapore and Finland retained their second and third positions. Switzerland was credited for encouraging innovation and an efficient labour market. Public institutions were described as among the most effective and transparent, while its economy was seen as among the most stable.

CHINA: China’s benchmark money-market rate fell to the lowest level in almost seven weeks after the central bank pumped more cash into the financial system. The People’s Bank of China injected 10 billion Yuan ($1.6billion) for seven days via reverse-repurchase operations yesterday, after adding a net 41.5 billion Yuan in the week ended Aug. 29. The monetary authority asked lenders to submit orders today for 14-day reverse repos and 28-day repo agreements, and gauged demand for 91-day bills, said a trader at a primary dealer required to bid at the auctions.

BONDS: Still no change in current market trend, still very quiet with only a few trades pushing through.

BILLS: The CBN failed to come and mop up liquidity yesterday through OMO and as a result rates dipped about 20bps on average as the excess liquidity puts downward pressure bill rates. There is a primary auction today which will surely come lower to mirror current market sentiment.

MONEY MARKET: OBB and unsecured O/N rates stable at 11.00% and 11.50% yesterday. Market was still liquid, as CBN failed to come out to mop up liquidity.

COMMODITIES: West Texas Intermediate fluctuated as President Barack Obama won support from two opposition lawmakers for a military strike on Syria, bolstering concern Middle East oil supply may be disrupted if the conflict widens. WTI for October delivery was at $108.07 a barrel in electronic trading on the New York Mercantile Exchange, down 47 cents.

Indicative Currency Exchange Rates
Bid        Offer

EURUSD      1.3172       1.3182
GBPUSD      1.5569       1.5579
USDJPY        99.72        100.12
USDCHF      0.9373      0.9393
GBPEUR       1.1770       1.1780
USDZAR      10.1768      10.2768
USDNGN     162.37        163.12
JPYNGN      1.6283        1.6783
CHFNGN     173.23        177.23
EURNGN     213.87       217.87
GBPNGN     252.79       256.79
ZARNGN      15.95         17.95

Commodities
West Texas Intermediate fluctuated as President Barack Obama won support from two opposition lawmakers for a military strike on Syria, bolstering concern Middle East oil supply may be disrupted if the conflict widens. WTI for October delivery was at $108.07 a barrel in electronic trading on the New York Mercantile Exchange, down 47 cents.

Interest rates
NIBOR (%)                      LIBOR (%)

O/N              11.8333          USD 1 month        0.1821
7 Day            12.2500         USD 2 month        0.2252
30 Day         12.5000         USD 3 month        0.2595
60 Day         12.7917           USD 6 month       0.3935
90 Day         13.1667          USD 12 month      0.6691
Y/Y Consumer Inflation June 2013 :          8.7%
FX Reserves: 27 August 2013 (USD bn)  46.887
MPR                                                                 12.00%
Source: Reuters, Bloomberg, Central Bank of Nigeria, Financial Market
Dealers Association Standard Chartered Bank Nigeria.

Fx
Hi               Low           Close        Prev.Close
USD/NGN
       163.10/20   162.67/77   162.87/97       162.97/07

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