A Review of the Nigerian Energy Industry

Financial market update

Financial markets12 September 2013, Sweetcrude, Lagos – Local and international financial market products and services update.
NIGERIA: A peer review of the ratio of daily oil production to the size of the Sovereign wealth Fund for each of the petrodollar countries, suggested that the amount set aside for Nigeria’s Sovereign Wealth Fund was very minimal. The report revealed that while Norway, the country with the single largest SWF of $737.2 billion, has daily oil production of 1.92 million barrels per day (bpd), Nigeria with only $1 billion set aside for the SWF produces about 2.2 million bpd.

US: the United States could default on its obligations as early as October 18 if Washington fails to raise the government’s borrowing cap, a new study predicted. The Bipartisan Policy Centre analysis says the default date would come no later than November 5, and that the government would quickly fall behind on its payments, including social security benefits and military pensions. The think-tank’s estimate is in line with a warning last month by Treasury Secretary Jacob Lew that the government would exhaust its borrowing authority by mid-October and be left with just $50bn cash on hand.

EUROPE: As Portugal’s bond yields move higher, the prospects of the country selling more debt this year to help exit its bailout program diminish. The cost of borrowing for 10 years has climbed since dropping to a three-year low of 5.19 percent in May when IGCP, the national debt agency, last sold bonds of that duration. Yields breached 8 percent on July 3 because of a rift in the government over budget policy. The rate was 7.1 percent yesterday, or almost twice what Ireland pays to borrow. Portugal is aiming to regain full access to debt markets with the end of its financial aid plan approaching in June 2014. The nation hadn’t sold longer-term bonds until January of this year after joining Ireland and Greece in April 2011 when the government requested an international bailout following a surge in national debt and borrowing costs.

CHINA: Chinese Premier Li Keqiang said the foundations of a growth rebound aren’t solid while cautioning that stimulus won’t help resolve deep-rooted issues in the world’s second-largest economy. The nation is taking steps to stabilize growth and can achieve the main economic targets this year, Li said. Policy makers have signaled they will defend a 7.5 percent expansion goal for 2013 and seek to ensure a pace of 7 percent in the coming years. Li pledged reforms that will ripple throughout the financial system as Communist Party leaders prepare for a November meeting to lay out a blueprint for sustaining long-term growth.

BONDS: A bit more activity yesterday than seen in previous sessions, though rates still closed largely flat across the curve.

BILLS: Bullish markets ahead of an OMO maturity today and the CBN is unlikely to roll it over. Rates were down about 10-15bps on average. No scheduled auctions this week increased supply.

MONEY MARKET: OBB and unsecured O/N rates trading up another 400bps to 18.00% and 18.50% to close yesterday. The spike came as liquidity thinned out on the back of funding for the CBN intervention sales as well as debits from the system by the NNPC and it also being a WDAS funding day; the discount window was unavailable to participating banks.

CBN WDAS AUCTION: CBN offered $300 million and sold $300million. Lowest intervention rate was 155.76 ( 1% commission inclusive). 18 banks bid.

Indicative Currency Exchange Rates
Bid        Offer

EURUSD         1.3306      1.3356
GBPUSD         1.5814       1.5864
USDJPY           99.35        99.75
USDCHF         0.9298     0.9328
GBPEUR         1.1885       1.1895
USDZAR         9.8635     10.0135
USDNGN        161.90       162.65
JPYNGN         1.6296       1.6796
CHFNGN        174.12        178.12
EURNGN       215.42       219.42
GBPNGN        256.03     260.03
ZARNGN         16.41         18.41

WTI crude swung between gains and losses after Saudi Arabia, the biggest producer in the Organisation of Petroleum Exporting Countries, said the global oil market is well-supplied.
WTI for October delivery was at $107.59 a barrel in electronic trading on the New York Mercantile Exchange, up 3 cents. The contract climbed 17 cents to $107.56 yesterday.

Interest rates
NIBOR (%)                             LIBOR (%)

O/N              21.5000                 USD 1 month       0.1824
7 Day            21.7500                 USD 2 month       0.2240
30 Day         22.3750                 USD 3 month       0.2544
60 Day         22.6250                 USD 6 month       0.3864
90 Day         22.9167                  USD 12 month     0.6651
Y/Y Consumer Inflation July 2013 :               8.7%
FX Reserves: 28 August 2013 (USD bn)     46.887
MPR                                                                   12.00%
Source: Reuters, Bloomberg, Central Bank of Nigeria, Financial Market Dealers Association Standard Chartered Bank Nigeria.
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