A Review of the Nigerian Energy Industry

Financial market update

Financial-market05 November 2013, Sweetcrude, Lagos – Local and international financial market products and services update.
NIGERIA: President Goodluck Jonathan yesterday said that more than $40 billion worth of investment would be generated by the power sector in the next 10 years. This is coming from companies like China Power that has invested over 20,000 megawatts of power and General Electric co investing another 10,000 megawatts of power.

BONDS: The move continued from last week’s close as market retraced further yesterday with offers pushing yields higher as the Jun 19s and Jan 22s traded towards 12.51% and 12.52% respectively. Overall, average yields were higher by about 6bps. We opened the week with a 50bps spread between average yields in bills and bonds. We saw some selling from offshore names, whose proceeds were invested in bills. We expect such flows to continue, thus widening this spread.

BILLS: Little activity yesterday as few trades fed through, yet correcting relatively low yields at the shorter end of the curve (30-60 days) to move higher by about 50bps. The rest of the curve followed suit, however only marginally. The CBN offered NGN 50Bio of 157D bills at OMO auction yesterday; although oversubscribed; no sale was made. This further increased the nervousness in the market regarding the potential impact the CRR debit/credit would have on liquidity and subsequently yields in the market.

MONEY MARKET: OBB and ON rates were higher yesterday at 10.50% and 10.75% respectively. Liquidity level is also lower at about NGN350 Bio; lowest level in about 2 weeks. We have a series of activities this week; biweekly PMA, maturing bills and CRR debit/credit. We expect that liquidity would be in check towards the end of the week.

CBN RDAS AUCTION: CBN offered $350 million and sold $343.1 million. Marginal rate was N155.71/US$ (excluding CBN 1% Commission). 20 banks bid.

US: Three Federal Reserve officials who vote on policy this year signalled the Fed may press on with easing for some time to reduce the jobless rate and push up inflation toward the Central Bank’s 2 percent target. They stated that the monetary policy in the United States is likely o remain highly accommodative for some time. The policy-setting Federal Open Market Committee last week maintained $85 billion in monthly asset purchases after unexpectedly refraining from tapering the program in September. The committee wants to see more signs of sustained economic gains, it said on October 30 after a two-day meeting.

EUROPE: Spain bonds outpaced other euro zone debt on Monday after Fitch upgraded its credit rating outlook, in a market underpinned by bets that the European Central Bank could signal further monetary easing this week. Core and lower-rated euro zone bonds rallied in the past week after slowing inflation firmed up market bets the ECB will ease policy further in coming months. Fitch revised Spain’s credit rating outlook to stable from negative, citing progress in cutting the deficit and a sooner-than-expected return to growth.

CHINA: China’s Yuan gained after the central bank raised the currency’s reference rate for the first time in seven days amid speculation the nation’s leadership will unveil measures to open up the economy. The People’s Bank of China lifted the Yuan’s fixing by 0.06 percent to 6.1447 per dollar. The spot rate in Shanghai is allowed to diverge a maximum 1 percent on either side of the reference rate. China’s Communist Party leaders will hold a four-day plenum, starting Nov. 9, to discuss economic policies.

Indicative Currency Exchange Rates
Bid         Offer

EURUSD         1.3499       1.3549
GBPUSD         1.5964        1.6014
USDJPY           98.48        98.88
USDCHF        0.9107        0.9137
GBPEUR         1.1826       1.1836
USDZAR        10.0950    10.2450
USDNGN        158.50      158.80
JPYNGN         1.6095       1.6595
CHFNGN        174.04       178.04
EURNGN        213.96       217.96
GBPNGN         253.03      257.03
ZARNGN          15.70         17.70

WTI swung between gains and losses near the lowest price in more than four months amid speculation crude inventories increased for a seventh week in the U.S. WTI for December delivery was $94.57 a barrel in electronic trading on the New York Mercantile Exchange, down 5 cents.

Interest rates
NIBOR (%)                    LIBOR (%)
O/N              10.5833        USD 1 month           0.1685
7 Day            11.1250         USD 2 month           0.2098
30 Day         11.7500         USD 3 month           0.2381
60 Day         12.1667         USD 6 month           0.3528
90 Day         12.5833        USD 12 month         0.5971
Y/Y Consumer Inflation September 2013 :    8.0%
FX Reserves: 01 November 2013 (USD bn) 45.214
MPR                                                                      12.00%
Source: Reuters, Bloomberg, Central Bank of Nigeria, Financial Market Dealers Association Standard Chartered Bank Nigeria.

                               Hi              Low          Cloe        Prev.Close
USD/NGN   158.78/88  158.34/44   158.50/60   158.66/77

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