A Review of the Nigerian Energy Industry

Financial market update

finance19 September 2013, Sweetcrude, Lagos – Local and international financial market products and services update.
NIGERIA: Nigerian President Goodluck Jonathan told lawmakers that he expected a decline in oil production and revenue next year before a recovery in 2015. Crude output in Africa’s top oil producer will probably fall to 2.39 million barrels a day in 2014 from this year’s budget forecast of 2.53 million barrels a day, Jonathan said in his medium-term expenditure plan. Revenue from crude oil is expected to drop 12 percent to 6.8 trillion naira ($41.9 billion) in 2014 compared with this year. Jonathan blamed “crude oil theft, illegal bunkering and production shuts-ins” for the reduced output, according to the document sent to lawmakers yesterday. Oil theft in the Niger River delta has reduced production in a nation that depends on crude exports for 80 percent of government revenue and more than 90 percent of foreign-currency income. Almost 400,000 barrels of oil are lost every day due to output disruptions, according to the document. Crude production fell to 1.81 million barrels a day in March, the lowest since September 2009, according to data compiled by Bloomberg.

BONDS: The local market like the rest of the world awaited the outcome of the FOMC meeting yesterday and our local MPC meeting 23/24 September for direction. Market volumes were still low however later in the session some demand came in to pull rates down.

BILLS: After the selloff in the markets over the last couple of trading days, as liquidity began improving in the money markets, demand followed suit in the bill markets with rates dipping up to 70bps. Auction yesterday was well bid and the cut off were reflective of this.

MONEY MARKET: OBB and unsecured O/N rates opened the day at 45% and traded up to 65% before finally crashing to close at 14.00%. Some players rediscounted their treasury bills rather than pay the high O/N funding cost and this brought in an injection of liquidity. OMO bill maturity expected today which should help further improve liquidity.

US: The policy-setting Federal Open Market Committee yesterday refrained from reducing the $85 billion pace of its monthly securities buying, sending stocks to record highs and triggering the biggest rally in Treasuries since 2011 as investors repositioned for a more accommodative central bank. Bernanke said the Fed must determine its policies based on “what’s needed for the economy,” even if it surprises markets. The decision to abstain from tapering bond purchases underscored Bernanke’s willingness to do anything to lower unemployment and pushed back expectations for a tightening of policy, according analysts. Bernanke said he was concerned that market interest rates, driven higher by his own suggestion he would scale back so-called quantitative easing, would curb growth.

EUROPE: The European Central Bank is concerned that investors could be spooked by next year’s bank balance-sheet reviews and stress tests unless their results are carefully timed. As the ECB prepares to take over supervision of all euro- area lenders in 2014, it will begin a three-phased analysis of the institutions coming under its umbrella. As laid out by Executive Board member Yves Mersch last month, the bank will start with a risk review before analyzing banks’ balance sheets and conducting stress tests in collaboration with the London- based European Banking Authority. Now central bankers are wrestling with how to move through the exercise without releasing conflicting numbers at different times, particularly for banks that aren’t in good health. ECB Executive Board member Peter Praet and Governing Council member Ewald Nowotny said this week that the two organizations must avoid giving different estimates of how much extra capital banks will need to raise.

CHINA: China’s new home prices rose at the fastest rate in at least 2-1/2 years in August, with some large cities rising around double the national pace, complicating government efforts to keep prices in check while supporting one of the stronger areas of the economy. The government has tried to control property prices, wary of a potential bubble and the possibility of unrest if people are priced out of the market but cannot push too hard as a strong property market has helped offset a general economic slowdown.

COMMODITIES: WTI crude rose for a second day after the Federal Reserve said it will maintain monthly bond purchases to stimulate economic growth in the U.S. WTI for October delivery, which expires tomorrow, gained as much as 69 cents to $108.76 a barrel in electronic trading on the New York Mercantile Exchange and was at $108.66.

Indicative Currency Exchange Rates
Bid          Offer

EURUSD         1.3528       1.3578
GBPUSD         1.6124        1.6174
USDJPY           98.47        98.87
USDCHF         0.9121       0.9151
GBPEUR         1.1919        1.1929
USDZAR         9.5587       9.7087
USDNGN        161.50        162.25
JPYNGN         1.6401        1.6901
CHFNGN        177.06       181.06
EURNGN       218.48       222.48
GBPNGN       260.40      264.40
ZARNGN        16.90         18.90

WTI crude rose for a second day after the Federal Reserve said it will maintain monthly bond purchases to stimulate economic growth in the U.S. WTI for October delivery, which expires tomorrow, gained as much as 69 cents to $108.76 a barrel in electronic trading on the New York Mercantile Exchange and was at $108.66.

Interest rates
NIBOR (%)                         LIBOR (%)

O/N              55.8333           USD 1 month            0.1800
7 Day           42.6250            USD 2 month            0.2205
30 Day        36.9583            USD 3 month            0.2525
60 Day        37.7917             USD 6 month            0.3789
90 Day        38.9583            USD 12 month          0.6501
Y/Y Consumer Inflation August 2013 :            8.2%
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.

                              Hi               Low            Close         Prev.Close
USD/NGN   162.42/52    161.90/00     162.00/10     162.30/40

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