A Review of the Nigerian Energy Industry

Financial market update

finance25 September 2013, Sweetcrude, Lagos – Local and international financial market products and services update.
NIGERIA: The Central Bank of Nigeria left its benchmark lending rate at a record high for a 12th consecutive meeting to bolster the naira and keep inflation within its target. Eleven of the 12 members of the Monetary Policy Committee voted to keep the policy rate unchanged at 12 percent, Governor Lamido Sanusi told reporters yesterday in the capital, Abuja. The naira has weakened 2.5 percent against the dollar this year and may come under more pressure as President Goodluck Jonathan estimates a 12 percent drop in oil and gas revenue in 2014. Sanusi said the bank is committed to use its foreign- currency reserves to support the naira. The central bank sells foreign currency at twice-weekly auctions to keep the naira within a range of 3 percentage points around 155 a dollar.

BONDS: Bonds still being paid for from the previous week’s rally post FOMC meeting, 10% FGN Jul 2030 recorded decent interest which traded 27bps lower in Monday’s session, a calm session was expected yesterday as market waits on decisions to be made at the MPC meeting.

BILLS: Relatively flat session in the bills market on Monday as trading activities slowed down ahead of the MPC meeting and primary auction to be held midweek.

MONEY MARKET: OBB and ON rate closed at 12.00% and 12.25% respectively on Monday, monthly statutory allocation expected in this week which should ease pressure on lending rates as auctions are being funded.

US: The $33 billion sale of Treasury two-year notes drew a lower-than-forecast yield as investors bet the Federal Reserve will remain accommodative amid uneven economic growth. The notes sold at a yield of 0.348 percent yesterday, compared with a forecast of 0.354 percent in a Bloomberg News survey of seven of the Federal Reserve’s 21 primary dealers. The bid-to-cover ratio, which gauges demand by comparing total bids with the amount of securities offered, was 3.09, compared with an average of 3.20 for the past five sales.

EUROPE: Cyprus’s first report card from international creditors included praise and underlined the next challenge: be more Irish than Greek. Economic output fell less than estimated in the first half of the year and sentiment indicators rebounded from lows in April, a month after the euro area’s first rescue that included seizing deposits and imposing capital controls. The yield on Cypriot bonds maturing in February 2020 dropped 4.2 percentage points to 11.2 percent from the peak level on March 28.

CHINA: China’s benchmark money-market rate dropped by the most in 12 weeks after the central bank added the most funds to the banking system since February. The People’s Bank of China pumped in 88 billion Yuan ($14 billion) via six-day reverse-repurchase contracts at 3.9 percent yesterday to meet quarter-end and pre-holiday cash demand. That was the most since 410 billion Yuan of 14-day agreements were sold Feb. 7, before the weeklong Lunar New Year break. The monetary authority didn’t offer reverse repos for about six months after that. Local financial markets will be closed October 1-7 for the National Day holidays.

COMMODITIES: West Texas Intermediate crude fell to the lowest close in eight weeks on speculation that U.S.- Iranian relations are thawing and as the threat of an American military strike on Syria recedes. WTI crude for November delivery declined 46 cents to $103.13 a barrel on the New York Mercantile Exchange. It was the lowest settlement since July 30.

Indicative Currency Exchange Rates
Bid         Offer

EURUSD          1.3468      1.3518
GBPUSD           1.5989      1.6039
USDJPY            98.62       99.02
USDCHF          0.9130      0.9160
GBPEUR          1.1872       1.1882
USDZAR           9.8577     10.0077
USDNGN         160.00      160.75
JPYNGN          1.6224       1.6724
CHFNGN         175.25       179.25
EURNGN         215.49      219.49
GBPNGN          255.82      259.82
ZARNGN           16.23         18.23

Commodities
West Texas Intermediate crude fell to the lowest close in eight weeks on speculation that U.S.- Iranian relations are thawing and as the threat of an American military strike on Syria recedes. WTI crude for November delivery declined 46 cents to $103.13 a barrel on the New York Mercantile Exchange. It was the lowest settlement since July 30.

Interest rates
NIBOR (%)                      LIBOR (%)

O/N               13.7500        USD 1 month        0.1798
7 Day             14.0000       USD 2 month       0.2190
30 Day          14.2500        USD 3 month       0.2502
60 Day          14.6667        USD 6 month       0.3695
90 Day          14.9167        USD 12 month      0.6351
Y/Y Consumer Inflation August 2013 :             8.2%
FX Reserves: 20 September 2013 (USD bn)  45.959
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      160.60/70    159.15/25    160.50/60     159.30/40

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