A Review of the Nigerian Energy Industry

Financial market update

finance02 December 2013, Sweetcrude, Lagos – Local and international financial market products and services update
NIGERIA: Increased lending by banks to the power and oil sectors of the economy may portend concentration risk for financial operators, according to industry watchers. To this end, there is a stir of anxiety among the banking public as failure in the sectors may adversely affect the fortunes of lender banks. Analysts say the current growing exposure to the power and oil sectors is at variance with extant regulations guiding loans and credit, which calls for urgent attention from the Central Bank of Nigeria.

BONDS: Friday’s session saw yields declined across all maturities while prices advanced slightly except for the 19s and 22s that traded flat with no change in price. Week on week, secondary market yields expanded by 5bps across the maturity spectrum we follow (1.40- 16.66YTM) except for the June 2019 which contracted by 3bps, closing 12.79% on average against 12.76% previous week.

BILLS: In line with expectation, the T-Bill market saw bearish activities as the average yield expanded by 25bps over last week, closing 11.95% on average against 11.63%. The positive move in the market was aided by the series of OMO auction offered by the CBN at very attractive rate to mop up the current liquidity in the system and the liquidity created by the bonds and bills that matured last week Thursday. The CBN was in the market four times last week and mopped up a total of N173.11Bios on various maturities. The better yield on OMO bills saw greater selling activities concentrated at the 34days – 111days

MONEY MARKET: OBB and ON rates both closed at 10.25%.

US: The weakest employment recovery in seven decades is proving a boon to equity markets. Five years into a rally that has restored $14 trillion to share prices, U.S. payrolls remain 1.5 million below the level in 2008, according to reports. While American workers struggle, investors are benefiting as expense reductions and record low borrowing costs drive profits and underpin a 167 percent advance in the S&P 500 over the past 57 months.

EUROPE: The European single currency will remain at risk if Europe is not able to press ahead with closer political and economic union, the governor of the Bank of Italy said in a interview published on Sunday. Ignazio Visco stated that a break up of Europe’s monetary union was a concrete threat back in 2011. Visco also added that Italian banks still faced problems with non-performing loans which stripping out writedowns already booked, totaled around 75 billion Euros and continued to absorb a large part of profits.

CHINA: Chinese manufacturing growth beat analyst estimates in November, indicating the nation’s economic recovery is sustaining momentum amid government efforts to rein in credit growth. The Purchasing Managers’ Index was 51.4, the National Bureau of Statistics and China Federation of Logistics and Purchasing said yesterday, exceeding 24 out of 26 estimates in a report.

COMMODITIES: WTI crude advanced for a second day after China’s manufacturing topped estimates in November, signaling the world’s second-biggest oil consumer is sustaining its economic growth. WTI for January delivery climbed as much as 59 cents to $93.31 a barrel in electronic trading on the New York Mercantile Exchange.

Indicative Currency Exchange Rates
Bid          Offer

EURUSD        1.3603       1.3653
GBPUSD        1.6417        1.6467
USDJPY         102.42       102.82
USDCHF       0.9050       0.9080
GBPEUR       1.2069        1.2079
USDZAR      10.1170        10.2670
USDNGN      158.45         158.80
JPYNGN       1.5471          1.5971
CHFNGN      175.08         179.08
EURNGN      215.54         219.54
GBPNGN      260.13         264.13
ZARNGN       15.66           17.66

Commodities
WTI crude advanced for a second day after China’s manufacturing topped estimates in November, signaling the world’s second-biggest oil consumer is sustaining its economic growth. WTI for January delivery climbed as much as 59 cents to $93.31 a barrel in electronic trading on the New York Mercantile Exchange.

Interest rates
NIBOR (%)                     LIBOR (%)

O/N             10.5417          USD 1 month       0.1683
7 Day          10.9583          USD 2 month       0.2070
30 Day       11.3750           USD 3 month       0.2391
60 Day       11.7083           USD 6 month       0.3468
90 Day       12.0000         USD 12 month      0.5780
Y/Y Consumer Inflation October 2013 :         7.8%
FX Reserves: 27 November 2013 (USD bn) 44.610
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    
158.55/65   158.35/45  158.35/45   158.35/45

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