A Review of the Nigerian Energy Industry

Financial market update

1finance1 December 2013, Sweetcrude, Lagos – Local and international financial market products and services update.
NIGERIA: The Minister of Finance, Dr. Ngozi Okonjo-Iweala, on Monday expressed concerns over the increasing rate of the nation’s domestic debt, and stated that about 19.87% of the country’s projected revenue for 2014 would be spent on debt servicing. She however said the ratio of the nation’s public debt to the GDP was still at a moderate level. She said the government had projected to spend N712bn on debt servicing in 2014, up from N495bn spent on debt servicing in 2011.

BONDS: The market continues to trade with no clear direction as the focus remains on today’s auction where the CBN intends to sell NGN40BN 3Yr and NGN35BN 20YR Bonds. We expect the auction to be fully subscribed (especially from locals – PFAs) with higher cut-off than previous auction (see advisory for details)..

BILLS: Bearish sentiment was sustained in the market yesterday taking average yields higher yesterday, although only marginally despite the absence of CBN in the market this week so far. We are trading close to psychological resistance levels as overall average yields edge over to 12.03% (+2bps).

MONEY MARKET: OBB and ON rates inched higher to 11% and 11.25% respectively

US: Federal Reserve officials are renewing a debate over cutting interest paid to banks on excess reserves, a move aimed at convincing investors that tapering its bond-buying isn’t the same as tightening its monetary policy. Lowering the rate, now 0.25 percent, is among “ideas that are still in play” as the central bank seeks to improve the way it communicates the outlook for interest rates, Atlanta Fed President Dennis Lockhart said on Dec. 5. According to reports, the reverse repo tool definitely has the potential to minimize some of the risks that were cited often over the past years .

EUROPE: European Union finance ministers moved to take the lead in creating a planned bank-resolution fund, risking a clash with parliament that may stymie the bloc’s efforts to contain future financial crises. In more than 15 hours of talks that ended inconclusively early today, ministers in Brussels moved toward creating the fund using an agreement among participating states, not EU law, effectively cutting the European Parliament out of the process.

CHINA: China’s stocks fell, sending the benchmark index towards its biggest loss in a month, as investors assess the outcome of a high-level government meeting that will decide economic policies for next year. The biggest coal producers, dropped 1.5 percent after the nation’s economic planner announced measures to curb consumption of the fuel next year because of worsening air pollution.

COMMODITIES: WTI traded near the highest price since October after industry data showed crude inventories declined for a second week in the U.S., the world’s biggest oil consumer. WTI for January delivery was at $98.49 a barrel in electronic trading on the New York Mercantile Exchange, down 2 cents.

Indicative Currency Exchange Rates
Bid        Offer

EURUSD        1.3766      1.3816
GBPUSD        1.6433      1.6483
USDJPY         102.65      103.05
USDCHF        0.8873     0.8903
GBPEUR        1.1937       1.1947
USDZAR        10.3514    10.5014
USDNGN       158.00     158.30
JPYNGN        1.5392      1.5892
CHFNGN       178.07      182.07
EURNGN       217.50     221.50
GBPNGN       259.64     263.64
ZARNGN       15.26        17.26

Commodities
WTI traded near the highest price since October after industry data showed crude inventories declined for a second week in the U.S., the world’s biggest oil consumer. WTI for January delivery was at $98.49
a barrel in electronic trading on the New York Mercantile Exchange, down 2 cents.

Interest rates
NIBOR (%)                       LIBOR (%)
O/N              11.3337           USD 1 month        0.1693
7 Day            11.5833           USD 2 month       0.2150
30 Day         11.9583           USD 3 month       0.2418
60 Day         12.2083          USD 6 month       0.3440
90 Day         12.5000         USD 12 month      0.5733
Y/Y Consumer Inflation June 2013 :              7.8%
FX Reserves: 11 December 2013 (USD bn)  44.621
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    158.30/40    157.95/05    158.20/30 158.40/50

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