A Review of the Nigerian Energy Industry

Financial market update

Financial markets16 September 2013, Sweetcrude, Lagos – Local and international financial market products and services update.
NIGERIA: Nigeria’s economic market size has been adjudged to be in the region of $247 billion and about 41 percent of the Gross Domestic Product of the entire nations in West Africa, reports show. This has placed Nigeria among the top African economies and a destination of choice for investment in Africa.

US: Bond investors are losing confidence in the Federal Reserve’s pledge to keep benchmark interest rates at about zero into 2015 as the U.S. economy accelerates. Concern the Fed will increase its target rate for overnight loans between banks next year is showing up in wider price swings for shorter-term securities. Volatility in five-year Treasuries rose above 10-year notes for the first time since 2011 and yields on two-year notes more than doubled in the past four months. While speculation the Fed will reduce its $85 billion of monthly bond purchases as soon as this week has left bond investors with the worst losses since 1994, analysts show the end to the central bank’s zero-rate policy would have an even bigger impact. Policy makers cut rates to records as the financial crisis mounted in 2008 and vowed to keep them there until the economy and employment shows sustained signs of recovery.

EUROPE: European Union attempts to centralize control of failing banks stumbled under a German-led attack that may imperil efforts to restore confidence in the euro zone’s financial system. If the plan doesn’t move forward quickly, the European Central Bank won’t be able to count on cross-border backstops if it encounters problems at euro-area banks. The ECB is scheduled to begin supervising lenders in the currency zone as soon as October 2014, forcing the EU to grapple with who should decide when to close a bank and who will pay for it.

CHINA: China is likely to achieve its growth target of 7.5 percent this year despite planned structural reforms to rebalance the world’s second largest economy, the World Bank president said on Sunday. Jim Yong Kim is making a four-day visit focusing on issues relating to carbon emission reductions and China’s urbanization push. Earlier this month the government announced a series of better than expected indicators for August, including strong exports and industrial output, that pointed to a pick-up in the domestic economy. China’s economy expanded 7.7 percent last year, its slowest growth since 1999.

BONDS: Market volumes are still very low, even with the spike at the primary auction and the adjustment in yesterday’s session. Yields went up about 5bps on average across the curve due to some light reaction to funding rates spiking.

BILLS: Bearish session today as ON and OBB rates spiked due to tight liquidity in the money markets. rates up about 50bps on average but up to 100bps on some maturities. Market is expected to remain relatively tight for the next couple of days.

MONEY MARKET: OBB and unsecured O/N rates trading significantly higher today, going up to 22% before finally closing at 20%. Liquidity tight currently as a result of funding for the bond auctions, WDAS and possibly CBN intervention funds. Market opened down N51billion today.

COMMODITIES: WTI crude fell for a second day amid speculation that the threat of imminent military strikes against Syria has eased as the U.S. pursues a plan to confiscate the nation’s chemical weapons. WTI for October delivery slid as much as $1.45 to $106.76 a barrel in electronic trading on the New York Mercantile Exchange and was at $107.35.

Indicative Currency Exchange Rates
Bid        Offer

EURUSD         1.3366     1.3416
GBPUSD          1.5952     1.6002
USDJPY           98.76       99.16
USDCHF         0.9241     0.9271
GBPEUR         1.1935      1.1945
USDZAR         9.8500    10.0000
USDNGN        162.20     162.95
JPYNGN          1.6424    1.6924
CHFNGN        175.52     179.52
EURNGN        216.80    220.80
GBPNGN         258.74    262.74
ZARNGN          16.47      18.47

Commodities
WTI crude fell for a second day amid speculation that the threat of imminent military strikes against Syria has eased as the U.S. pursues a plan to confiscate the nation’s chemical weapons. WTI for October delivery slid as much as $1.45 to $106.76 a barrel in electronic trading on the New York Mercantile Exchange and was at $107.35.

Interest rates
NIBOR (%)                   LIBOR (%)

O/N              23.5833      USD 1 month         0.1802
7 Day            21.4583      USD 2 month         0.2225
30 Day         20.7083      USD 3 month         0.2539
60 Day         21.1000       USD 6 month         0.3834
90 Day         21.3750       USD 12 month        0.6636
Y/Y Consumer Inflation July 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     163.50/60   162.40/50   162.70/80     162.40/50

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