A Review of the Nigerian Energy Industry

Financial market update

Financial markets04 November 2013, Sweetcrude, Lagos – Local and international financial market products and services update.
NIGERIA: Central Bank of Nigeria, CBN, said the three tiers of government over shoot the 2012 budget by N1,168.1 billion, or 2.9 per cent of GDP. The consolidated revenue and expenditure of the governments in 2012 was N8,928.9 billion and N10,0970 billion, respectively. CBN, in its newly released 2012 annual report, said the combined fiscal operations resulted in an overall notional deficit of N1,168.1 billion, or 2.9 per cent of GDP. At N10,654.7 billion, or 26.3 per cent of GDP, federally- collected revenue (gross) exceeded the N7,953.7 billion target for fiscal 2012 by 34.0 per cent.

We finally start to see some retracement as yields tipped higher by 6bps. It was quiet session on Friday and we expect to see the real action this week; looking to see yields higher.

BILLS: Quiet session last week Friday, with the main and perhaps only noteworthy event of the day being the CBN offering 141day bills at OMO auction amounting to NGN50Bio and selling about N102.94Bio as the auction was well over-subscribed. Average yields remained relatively flat on Friday. The market is really loaded with bills and we expect to see increased appetite from locals and offshore clients.

MONEY MARKET: OBB and ON rates remained unchanged at 10.25% and 10.50% respectively. Market remains liquid currently above NGN500Bio and we expect some more inflow form maturing bills this week. More CBN OMO auctions expected.

US: Treasury 10-year yields snapped a three-day advance before two voting members of the Federal Reserve’s policy-setting committee speak today as investors weigh when the central bank will slow stimulus. Treasuries were near their cheapest level relative to U.S. stocks since 2011, based on differences in yield. Benchmark yields completed their biggest weekly advance in two months on Nov. 1, when Fed Bank of St. Louis President James Bullard said the improvement in the labour market could warrant a cut in the central bank’s $85 billion in monthly bond purchases.

EUROPE: The Confederation of British Industry raised its forecasts for U.K. economic growth and said it expects business investment and trade to aid the recovery starting next year. The business lobby sees the economy expanding 1.4 percent this year and 2.4 percent in 2014, it said in a quarterly report. That’s up from 1.2 percent and 2.3 percent projected in August. The CBI, which holds its annual conference in London today, also said unemployment — which the Bank of England has set as the key indicator for its guidance on policy — will fall to 7.2 percent by the end of 2015 from its current 7.7 percent.

Most Chinese companies rose after an official government report showed service industries expanded at a faster pace in October. Property stocks declined. Five stocks gained for every three that fell on the Shanghai Composite Index, which was little changed at 2,149.64. The non-manufacturing Purchasing Managers’ Index rose to 56.3 in October from 55.4 in September. That was the highest level this year and followed faster-than-estimated growth in two manufacturing indexes last week. China’s top party officials will meet from Nov. 9-12 to map out a blueprint for reform.

Indicative Currency Exchange Rates
Bid       Offer

EURUSD       1.3492      1.3542
GBPUSD        1.5936     1.5986
USDJPY          98.62       99.02
USDCHF        0.9119     0.9149
GBPEUR        1.1811       1.1821
USDZAR        10.1165    10.2665
USDNGN        158.42     158.72
JPYNGN         1.6064     1.6564
CHFNGN        173.73      177.73
EURNGN        213.74     217.74
GBPNGN        252.46     256.46
ZARNGN        15.66         17.66

WTI oil traded near the lowest price in more than four months amid speculation U.S. crude supplies will be sufficient. London traded Brent rebounded as an index of China’s services industry advanced to the highest level this year. WTI for December delivery was at $94.53 a barrel in electronic trading on the New York Mercantile Exchange, down 8 cents.

Interest rates
NIBOR (%)                       LIBOR (%)

O/N              10.5833          USD 1 month        0.1685
7 Day            11.1250           USD 2 month        0.2099
30 Day         11.7500           USD 3 month        0.2378
60 Day         12.1667           USD 6 month        0.3535
90 Day         12.5833          USD 12 month       0.6016
Y/Y Consumer Inflation September 2013 :   8.0%
FX Reserves: 24 October 2013 (USD bn)     45.145
MPR                                                                      12.00%
Source: Reuters, Bloomberg, Central Bank of Nigeria, Financial Market Dealers Association Standard Chartered Bank Nigeria.

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