A Review of the Nigerian Energy Industry

Financial market update

Financial markets13 November 2013, Sweetcrude, Lagos – Local and international financial market products and services update.
NIGERIA: Nigeria’s parliament postponed President Goodluck Jonathan’s budget speech in which he’s expected to propose spending limits as revenue falls in Africa’s largest oil producer. The presentation will be made on Nov. 19 instead of tomorrow, Enyinnaya Abaribe, chairman of the Senate Committee on Information and Media, said in a phone interview today. The budget announcement has been postponed because parliament has not yet approved the spending plan upon which it will be based and some lawmakers are attending a conference away from the legislature, he said. Investors are watching Jonathan’s budget for signs that spending will soar in a pre-election year as it did before the 2011 presidential vote, when it climbed 17 percent. Jonathan, 55, signalled his intent to cut planned expenditure by 10 percent next year to 4.5 trillion naira ($28 billion) as crude output missed targets, according to a medium-term spending plan released on Sept. 18.

BONDS: We are likely to see active trading resume in this space only after conclusion of the bond auction set for today. The Market was quiet yesterday, as yields moved higher still, but lazily by 2bps on average. We expect a reversal of the bearish trend on the back of expected lower cut-off for the auction today as the auction remains quite appetizing to the locals (Pension Funds). The 3yrs and 20yrs bond now trading at 12.52% and 12.86% respectively in the secondary market.

BILLS: The Bullish sentiment in the market was sustained yesterday; fuelled by local and offshore demand. Yields dropped by about 6bps on average with most of the move seen in the short – medium end (below 5 months). Barring any CBN OMO auction, we expect this trend to continue today.

MONEY MARKET: OBB rate remained unchanged at 10.50% while ON rate moved to 10.75%.

US:
Treasuries rose before Janet Yellen faces a confirmation hearing tomorrow to lead the Federal Reserve amid speculation the central bank will maintain monetary stimulus to help the economy avoid a slowdown. The U.S. 10-year yield fell two basis points to 2.75 percent as of 2:08 p.m. in Tokyo from yesterday, according to reports. The 2.5 percent note due in August 2023 rose 5/32, or $1.56 per $1,000 face amount, to 97 27/32.

EUROPE: Eurostat, the European Union’s statistics agency, withdrew a report criticizing Spain’s processes for reporting budget data after consultations with the country’s government. EU statisticians, who had said Spain lacked “initiative” in addressing flaws in its budget figures, removed the report, published in April, from their website in order to revise their comments. The move marks a retreat for Eurostat after the agency sent an extraordinary mission to Spain in September to follow up urgent concerns after regional officials failed to report all their unpaid bills in 2011. Spain has missed EU budget targets since its deficit surpassed 3 percent of gross domestic product in 2009.

CHINA: China’s 10-year bonds fell, pushing the yield to the highest level since 2008, after the nation’s leaders reinforced a commitment to free up interest rates. Market forces will be “decisive” in allocating resources, according to a communiqué released last night after a four-day economic planning meeting. The outline, which lacked specific details, elevated the role of markets, which was described as “basic” until as recently as last month, according to reports. The yield on the 4.08 percent government bonds due August 2023 increased two basis points to 4.47 percent as of 11:20 a.m. in Shanghai, according to data from the Interbank Funding Centre.

COMMODITIES: West Texas Intermediate traded near the lowest price in more than five months before government data forecast to show crude inventories rose to the highest level since June in the U.S., the world’s biggest oil consumer. WTI for December delivery was at $93.12 a barrel in electronic trading on the New York Mercantile Exchange, up 8 cents.

Indicative Currency Exchange Rates
Bid        Offer

EURUSD        1.3445      1.3495
GBPUSD        1.5891       1.5941
USDJPY          99.53        99.93
USDCHF        0.9170      0.9200
GBPEUR         1.1819       1.1829
USDZAR        10.2881    10.4381
USDNGN        158.70      159.21
JPYNGN         1.5966       1.6466
CHFNGN        173.29       177.29
EURNGN        213.65      217.65
GBPNGN         252.52     256.52
ZARNGN          15.45       17.45

Commodities
West Texas Intermediate traded near the lowest price in more than five months before government data forecast to show crude inventories rose to the highest level since June in the U.S., the world’s biggest oil consumer. WTI for December delivery was at $93.12 a barrel in electronic trading on the New York Mercantile Exchange, up 8 cents.

Interest rates
NIBOR (%)                     LIBOR (%)

O/N             10.6667          USD 1 month          0.1859
7 Day           11.4167           USD 2 month          0.2279
30 Day        11.7083           USD 3 month         0.2666
60 Day        12.0000         USD 6 month          0.3965
90 Day        12.4583          USD 12 month        0.6742
Y/Y Consumer Inflation September 2013 :      8.0%
FX Reserves: 11 September 2013 (USD bn)   44.954
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
    159.12/22   158.62/72    158.91/01     158.95/05

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