A Review of the Nigerian Energy Industry

Financial market update

Financial markets26 September 2013, Sweetcrude, Lagos – Local and international financial market products and services update.
NIGERIA: The total amount of Deposit Money Banks’ (DMBs’) reserves with the Central Bank of Nigeria (CBN) increased to N2.784 trillion in August. The latest central bank’s money and credit statistics showed that the amount represents an increase by N367 billion or 15 per cent, compared to the N2.417 trillion recorded in July. Bank reserves are deposits in accounts with the central bank that are not to be lent out. It is held as part of risk management measures. The significant increase recorded in the month under review was as a result of the implementation of a 50 per cent Cash Reserve Requirement (CRR) for public sector deposits in August, which saw the withdrawal of over N1 trillion from the banking system.

BONDS: The bullish trend in the bond market has remained unabated in reaction to MPC’s decision to keep monetary conditions unchanged. Yields have broken through the 13% psychological level across most tenors yesterday and this should result in a calmer market today. Bond yields traded 18bps lower yesterday.

BILLS: T-bill yields declined between 25-40bp yesterday as all tenors were bought. The OMO window remained closed.

MONEY MARKET: OBB and ON rate closed yesterday at an average of 15%.

CBN WDAS AUCTION: CBN offered $400 million and sold $300.15 million. Lowest intervention rate was $/N157.3075 (1% commission inclusive). 14 banks bid.

US: The U.S. will hit its debt ceiling by 17 October, leaving the government with half the money needed to pay its bills, the Treasury Secretary has warned. Jack Lew said that unless the U.S is allowed to extend its borrowing limits, the country will be left with about $30billion to meet its commitment. He added that there’s a possibility that net expenditures on certain days could be as high as $60billion. The U.S. government and Republicans are at a stalemate over extending the credit limit needed to avoid default. President Obama and Democrats have said that they will not negotiate with Republicans over their demand that the government agrees budget cuts in return for backing a rise in the borrowing limit.

EUROPE: The European Union is weighing whether a 50 billion-euro ($68 billion) rescue fund can be turned into a bank backstop for member states outside the single-currency bloc, two EU officials said. The EU’s balance-of-payments fund currently has about 40 billion Euros available, after being used to help Latvia, Hungary and Romania, the officials said. The European Commission now wants to overhaul the fund and add a tool for bank aid that could be tapped by non-euro countries whose lenders fail next year’s continent-wide stress tests, they said on condition of anonymity because the talks are private.

CHINA: Yuan forwards strengthened for the first time in three days after the central bank set the currency’s reference rate near an all-time high amid signs that China’s economic growth is gathering pace. The People’s Bank of China rose the Yuan’s fixing 0.03 percent today to 6.1477 per dollar, just shy of a record 6.1475 set on September 23. China’s manufacturing expanded the most in six months in September, according to a preliminary reading. Gains in the local currency were curbed as concerns that U.S. lawmakers are running out of time to decide on raising the government’s debt limit damped demand for riskier assets.

COMMODITIES: WTI crude fell for a sixth day, the longest losing streak in 16 months, after a government report showed U.S. inventories unexpectedly rose last week as demand slipped. WTI crude for November delivery fell as much as 46 cents to $102.20 a barrel in electronic trading on the New York Mercantile Exchange and was at $102.31. The contract dropped 47 cents to $102.66 yesterday, the lowest settlement since July 3.

Indicative Currency Exchange Rates
Bid           Offer

EURUSD         1.3517           1.3567
GBPUSD         1.6078          1.6128
USDJPY           98.96            99.36
USDCHF         0.9099         0.9129
GBPEUR          1.1895          1.1905
USDZAR          9.9800         10.1300
USDNGN         160.00         160.75
JPYNGN           1.6168         1.6668
CHFNGN          175.84         179.84
EURNGN          216.27          220.27
GBPNGN          257.25        261.25
ZARNGN          16.03           18.03

Commodities
WTI crude fell for a sixth day, the longest losing streak in 16 months, after a government report showed U.S. inventories unexpectedly rose last week as demand slipped. WTI crude for November delivery fell as much as 46 cents to $102.20 a barrel in electronic trading on the New York Mercantile Exchange and was  at $102.31. The contract dropped 47 cents to $102.66 yesterday, the lowest settlement since July 3.

Interest rates
NIBOR (%)                          LIBOR (%)

O/N               17.3333             USD 1 month           0.1791
7 Day             17.0833            USD 2 month           0.2180
30 Day          17.3750             USD 3 month           0.2476
60 Day          17.6667             USD 6 month           0.3685
90 Day          17.8333            USD 12 month         0.6331
Y/Y Consumer Inflation August 2013 :            8.2%
FX Reserves: 24 September 2013 (USD bn) 45.782
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   159.00/10   160.00/10    160.00/10

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