A Review of the Nigerian Energy Industry

Financial market update

Financial markets18 October 2013, Sweetcrude, Lagos – Local and international financial market products and services update.
NIGERIA: Fitch ratings, an international rating agency, yesterday rated Nigeria’s economic outlook as stable. The agency also affirmed the country’s long term foreign and local currency Issuer Default Ratings (IDR) and senior unsecured bond ratings at ‘BB-’ and ‘BB’ respectively, while the short-term foreign currency IDR was rated ‘B’ and Country Ceiling at ‘BB-’. This vote of confidence on the prospects of the Nigerian economy is coming a few days after another respected international rating agency, Standard and Poor’s also affirmed a strong and positive rating for the management of the economy.

BONDS: Fairly bullish market yesterday, with yields moving lower across all maturities averaging about 10bps. Today, we have auction for the 3YR and 20YR maturities and expect full subscription primarily fuelled by local demand from pensions funds.

BILLS: Market was slightly bullish with demand in the shorter end of the curve, although covered by offers in 3s, leaving the overall average yields relatively unchanged from previous day. Maturing OMO bills of N146b was effectively neutralised by N144b OMO auction sold by CBN yesterday. Overall, the market is flush with liquidity and we expect some more demand feeding into the market.

MONEY MARKET: OBB and ON rates closed at 10.25% and 10.50% respectively as the market opened high at N837billion. The level of liquidity is still very high and this will continue to drive ON rates lower.

US: U.S. lawmakers launched an effort to resolve budget difference in a less confrontational fashion on Thursday as Washington picked up the pieces from a political crisis that has slowed the economy and undermined the country’s international standing. As federal employees returned to work, Republican and Democratic negotiators held their first meeting to tackle tax and spending issues that have led to repeated rounds of brinkmanship over the past three years.

EUROPE: Leading economic institutes halved their 2013 German growth forecast on Thursday, citing a sharp downturn in industrial production during the winter, but said Europe’s largest economy would gain momentum next year thanks to domestic demand. The institutes, whose analysis flows into the government’s own economic forecasts cut their forecast for 2013 to 0.4 percent, which would be a slowdown compared with 0.7 percent growth last year.

CHINA: China’s economic growth accelerated for the first time in three quarters, as Premier Li Keqiang spurred factory output and investment to meet the government’s expansion goal for 2013. Gross domestic product rose 7.8 percent in the July- September period from a year earlier, the National Bureau of Statistics said today in Beijing. Industrial production advanced in September by 10.2 percent, in line with projections, while retail sales gained 13.3 percent.

COMMODITIES: WTI crude rose from a three month low as China’s economic growth accelerated for the first time in three quarters, signalling increased demand in the world’s second oil consumer. WTI for November delivery gained as much as 21 cents to $100.88 a barrel in electronic trading on the New York Mercantile Exchange.

Indicative Currency Exchange Rates
Bid        Offer

EURUSD      1.3685       1.3735
GBPUSD      1.6178        1.6228
USDJPY        98.01         98.41
USDCHF      0.9018      0.9048
GBPEUR       1.1822       1.1832
USDZAR       9.7812       9.9312
USDNGN      159.40     160.15
JPYNGN       1.6264     1.6764
CHFNGN      176.76     180.76
EURNGN      218.14     222.14
GBPNGN      257.88     261.88
ZARNGN       16.30       18.30

Commodities
WTI crude rose from a three month low as China’s economic growth accelerated for the first time in three quarters, signalling increased demand in the world’s second oil consumer. WTI for November delivery gained as much as 21 cents to $100.88 a barrel in electronic trading on the New York Mercantile Exchange.

Interest rates
NIBOR (%)                      LIBOR (%)

O/N               10.5000        USD 1 month         0.1725
7 Day             10.8333        USD 2 month         0.2125
30 Day          11.1250          USD 3 month        0.2421
60 Day          11.3750         USD 6 month         0.3594
90 Day          11.7500         USD 12 month       0.6201
Y/Y Consumer Inflation September 2013 :   8.0%
FX Reserves: 11 October 2013 (USD bn)     45.096
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
      160.10/20    159.05/15    159.90/00     160.09/19

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