A Review of the Nigerian Energy Industry

Financial market update

Financial markets18 September 2013, Sweetcrude, Lagos – Local and international financial market products and services update.
NIGERIA: The governments of Nigeria and France on Monday signed two agreements on trade and investment structure development in their efforts to enhance their respective economic growth. The first agreement was for the establishment of Franco- Nigeria Trade and Investment Council (FNTIC), while the second was on the development of Small and Medium Enterprises (SMEs) between the two countries. Nigeria’s Minister of Industry, Trade and Investment Olusegun Aganga signed the FNTIC agreement on behalf of the Federal Government, while his French counterpart Nicole Bricq signed for that country in Abuja, the Nigerian capital city. The second agreement was signed by Bature Masari, the Director General of the Small and Medium Enterprises Development Agency of Nigeria (SMEDAN), while his counterpart in the French Banque Publique d’Investissement (BPI France) Viginie Poncet signed for the country.

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

BILLS: Bearish session on Friday 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 traded significantly higher on Friday, going up to 22% before finally closing at 20%. Liquidity tight as a result of funding for the bond auctions, WDAS and possibly CBN intervention funds. Market opened down N51billion on Friday.

CBN WDAS AUCTION: CBN offered $300 million and sold $300million. Lowest intervention rate was 155.76 ( 1% commission inclusive). 16 banks bid.

US: By just talking about adding stimulus at a slower pace, Federal Reserve Chairman Ben S. Bernanke sent bond yields a percentage point higher. The rout serves as a warning to monetary policy makers that their exit from record accommodation won’t be easy to control. The jump in yields has pushed up the cost of mortgages for millions of Americans, curbed demand for homes and prompted thousands of job cuts, all at a time when the Fed’s policies are aimed at creating jobs and supporting housing. Bernanke has stressed that any reduction in the amount of money the central bank pumps into the financial system each month doesn’t mean policy is getting any more restrictive.

EUROPE: The Spanish Treasury is ramping up sales of short-term debt to squeeze maximum savings from the rally in European markets while increasing its vulnerability to higher yields. The average duration of Spanish government paper was 6.24 years at the end of August, the lowest in almost a decade, and the debt coming due in less than 18 months jumped by 9.2 percent in the first seven months, data from the Treasury and the central bank show. Prime Minister Mariano Rajoy has to refinance at least 122 billion Euros ($163 billion) of debt next year and fund a budget deficit he projects at about 59 billion euros.

CHINA: China’s Yuan fell against the dollar on Tuesday on suspected intervention by the central bank to prevent its currency from appreciating too fast, a sign that any further gains by the Yuan might be modest. Yuan traded at 6.1213 per dollar near midday, down 0.02 percent from the previous close. The People’s Bank of China fixed the Yuan’s midpoint at 6.1571, 0.03 percent weaker than Monday’s 6.1554. In the past week, the PBOC set a series of stronger midpoints. But it restrained gains in the spot market in order to narrow the gap between the two rates and prepare for more liberalization.

COMMODITIES: WTI crude fell to a three-week low as a plan to estimate Syria’s chemical weapons reduced the risk of a disruption in Middle East exports. WTI crude for October delivery decreased $1.62 to $106.59 a barrel on the New York Mercantile Exchange, the lowest settlement since August 26. The volume for all futures traded was 8.8 percent above the 100-day average.

Indicative Currency Exchange Rates
Bid        Offer

EURUSD       1.3343    1.3393
GBPUSD       1.5912     1.5962
USDJPY        99.12       99.52
USDCHF       0.9259   0.9289
GBPEUR       1.1925     1.1935
USDZAR       9.8635    10.0135
USDNGN      161.40     162.15
JPYNGN       1.6283    1.6783
CHFNGN      174.32    178.32
EURNGN      215.36    219.36
GBPNGN      256.82    260.82
ZARNGN      16.36       18.36

Commodities
WTI crude fell to a three-week low as a plan to estimate Syria’s chemical weapons reduced the risk of a disruption in Middle East exports. WTI crude for October delivery decreased $1.62 to $106.59 a barrel on the New York Mercantile Exchange, the lowest settlement since August 26. The volume for all futures traded was 8.8 percent above the 100-day average.

Interest rates
NIBOR (%)                         LIBOR (%)

O/N             25.8333              USD 1 month       0.1793
7 Day          24.1250               USD 2 month       0.2215
30 Day       23.7083               USD 3 month      0.2519
60 Day       24.2083               USD 6 month       0.3799
90 Day      24.6667                USD 12 month      0.6561
Y/Y Consumer Inflation July 2013 :               8.7%
FX Reserves: 13 September 2013 (USD bn) 46.341
MPR                                                                      12.00%
Source: Reuters, Bloomberg, Central Bank of Nigeria, Financial Market Dealers Association Standard Chartered Bank Nigeria.

Fx
                             Hi                Low           Close         Prev.Closae
USD/NGN  161.70/80       61.70/80     161.90/00    161.82/92

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