A Review of the Nigerian Energy Industry

Financial market update

finance17 December 2013, Sweetcrude, Houston – Local and international financial market products and services update.
NIGERIA: Naira fears emerge ahead 2014 as analysts examine currency risks. The prospects of an outflow of funds from emerging markets on a cut in US stimulus, appointment of a new CBN governor, pre-election fiscal expansion and potential pullback in oil prices are combining to form a perfect storm of uncertainty for the naira in 2014 prompting fears of a plunge in the currency.

BONDS: Similar to the bills market, the bearish run in the bonds market saw average yields rise by 21bps to 13.08% as yields rose across the entire maturity spectrum we follow. The largest yield increase occurred at the 5.54yrs and 5.85yrs maturities.

BILLS: Market remained bearish in yesterday’s trading as average yields rose to 12.28% (+8bps). With bills around the 4 month maturity trading closely to psychological resistance levels at 13% yield (briefly wielding highest yields on the curve) and settling about 30bps lower at close.

MONEY MARKET: OBB and ON rates dropped further to 10.50% and 10.75% respectively.

CBN RDAS AUCTION: CBN offered $400 million and sold $399.98 million. Marginal rate was N155.72/US$ (excluding CBN 1% Commission). 22 banks bid.

US: U.S. banks seeking regulatory approval to boost payouts to shareholders next year will face a new hurdle as the Federal Reserve begins making its own projections for lenders’ balance sheets in annual stress tests. The Fed, using its own model for how banks will fare in an economic slump, may project lower capital ratios for the nation’s largest lenders than what the firms calculated, according to a letter issued yesterday by the central bank. That’s because Fed estimates will rely on historical data showing industry assets rose in the last three recessions

EUROPE: European Union banks have shed more than $1.1 trillion of assets since the end of 2011 in a shift away from risky investments such as asset-backed debt as regulators push lenders to shore up their balance sheets. Lenders reduced assets weighted for risk by 817 billion Euros ($1.1 trillion) between December 2011 and June 2013, the European Banking Authority, the bloc’s top banking regulator, said in a report yesterday. Banks’ core Tier 1 capital ratios, a measure of how well they can absorb losses, rose to 11.7 percent from 10 percent over the time period.

CHINA: China, the largest foreign creditor to the U.S., increased its ownership of Treasuries in October to almost the record level reached in July 2011 after the Federal Reserve unexpectedly opted not to slow bond buying. Holdings rose $10.7 billion, or 0.8 percent, to $1.304 trillion, according to Treasury Department data released yesterday. China held a record $1.314 trillion in July 2011.

Total foreign holdings of Treasuries rose $600 million, or 0.01 percent, in October to $5.65 trillion.

COMMODITIES: WTI fell amid speculation that gasoline and distillate stockpiles increased last week in the U.S., signaling ample supply in the world’s biggest oil consumer. WTI for January delivery declined as much as 25 cents to $97.23 a barrel in electronic trading on the New York Mercantile Exchange, and was at $97.37 at 1:15 p.m. Singapore time.

Indicative Currency Exchange Rates
Bid       Offer

EURUSD     1.3772    1.3822
GBPUSD     1.6323    1.6373
USDJPY      102.93    103.33
USDCHF    0.8863    0.8893
GBPEUR     1.1852     1.1862
USDZAR    10.2240   10.3740
USDNGN     158.82    159.12
JPYNGN      1.5430    1.5930
CHFNGN     179.19    183.19
EURNGN     218.73   222.73
GBPNGN     259.24   263.24
ZARNGN    15.53        17.53

Commodities
WTI fell amid speculation that gasoline and distillate stockpiles increased last week in the U.S., signaling ample supply in the world’s biggest oil consumer. WTI for January delivery declined as much as 25 cents to $97.23 a barrel in electronic trading on the New York Mercantile Exchange, and was at $97.37 at 1:15 p.m. Singapore time.

Interest rates
NIBOR (%)                     LIBOR (%)

O/N             10.8333         USD 1 month        0.1650
7 Day           11.0833         USD 2 month        0.2132
30 Day        11.3333          USD 3 month        0.2428
60 Day        11.5833          USD 6 month        0.3454
90 Day        11.8333          USD 12 month      0.5796
Y/Y Consumer Inflation June 2013 :               7.9%
FX Reserves: 13 December 2013 (USD bn) 44.353
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    158.35/45    158.46/56    158.82/92

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