A Review of the Nigerian Energy Industry

Financial market update

Financial markets23 September 2013, Sweetcrude, Lagos – Local and international financial market products and services update.
NIGERIA: Governor of Central Bank, Lamido Sanusi, says the Federal Government established the Sovereign Wealth Fund to shield the Nigerian Economy from adverse global shocks. Sanusi, who made the remark at the Economy Conference in Lagos yesterday, said that the fund would shield the economy in the event of total crash of global oil price. Reports show that the fund is about $1 billion. The fund is being invested overseas in real and financial assets.

BONDS: In reaction to the FOMC’s surprise decision not to begin tapering, the local market rallied last week. Market liquidity was thin and volumes very low as expected considering the one directional flow of trading. Yields traded down about 25bps on average. The only factor leading to some resistance is a possible decision by Nigeria’s MPC on Tuesday which might push rates higher as they try to deal with the recent spikes in USD/NGN.

BILLS: Rates also came off an average 35bps last week Thursday in reaction to the FOMC decision. Rates traded lower but some profit takers pushed rates back up to a final close of an average 35bps on the day. Also a very illiquid session in the bill markets.

MONEY MARKET: OBB and unsecured O/N rates coming lower last week Thursday to close at 13.00%, market opened down N48billion yesterday, liquidity improving through maturing OMO bills in the size of N78billion. Being a non funding day for either WDAS or intervention funds the window was accessible and this helped keep rates low.

US: Demand for new Treasuries from their biggest owners is proving impervious to rising yields and the retreat of Wall Street dealers. Bids submitted by investors including mutual funds, foreign central banks, pension managers and insurance companies totalled 83 percent of Treasury debt auctioned this year, compared with 84 percent in 2012 and 37 percent in 2008 at the peak of the worst financial crisis since the Great Depression, according to reports.

EUROPE: Angela Merkel’s third term, after her overwhelming election victory yesterday, is likely to force a decision on where to spend political capital: on Europe’s ills or Germany’s. While Germany ranks fourth in the global competitiveness study by the World Economic Forum thanks to policies enacted by her predecessor Gerhard Schroeder, the challenges are piling up.

Merkel must address the aging population, shortfalls in education and infrastructure spending and ballooning pension costs, say policy makers, economists and investors.

CHINA: A Chinese manufacturing index rose to a six-month high in September, signalling that a rebound in the world’s second-largest economy is gaining steam. The preliminary reading of 51.2 for a Purchasing Managers’ Index released today compared with a 50.9 median estimate. The gauge was at 50.1 in August.

Indicative Currency Exchange Rates
Bid        Offer

EURUSD          1.3538      1.3588
GBPUSD          1.6034      1.6084
USDJPY            98.96        99.36
USDCHF         0.9098      0.9128
GBPEUR          1.1844       1.1854
USDZAR         9.9839      10.1339
USDNGN         160.65     161.40
JPYNGN          1.6234      1.6734
CHFNGN        176.58      180.58
EURNGN        217.49      221.49
GBPNGN         257.59      261.59
ZARNGN          16.09        18.09

WTI crude fluctuated as signs that manufacturing in China expanded the most since March countered easing concern that Syria’s conflict will spread and disrupt oil supplies. WTI for November delivery was at $104.72 a barrel in electronic trading on the New York Mercantile Exchange, down 3 cents. The October contract, which expired on September 20, closed at $104.67 a barrel, the lowest settlement since August. 21.

Interest rates
NIBOR (%)                         LIBOR (%)

O/N              15.6667             USD 1 month          0.1795
7 Day            15.7083             USD 2 month         0.2183
30 Day         16.0417              USD 3 month         0.2496
60 Day        16.2500              USD 6 month        0.3734
90 Day        16.4583              USD 12 month       0.6386
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.

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