A Review of the Nigerian Energy Industry

Financial market update

Financial markets19 December 2013, Sweetcrude, Houston – Local and international financial market products and services update.
NIGERIA: Nigeria’s plan to rebase its gross domestic production figures next year may boost the assessment of the size of its economy by as much as 60 percent, surpassing South Africa as the continent’s largest nation in terms of total wealth. Africa’s biggest oil producer may see its economy measured between $384 billion and $424 billion in 2014, according to projections. This is in comparison to $370 billion for South Africa’s economy.

BONDS: Market settled yesterday as players stayed thin on positions awaiting FEDs decision and guidance on the much anticipated “tapering”. We however saw a slight reversal in the sell-off of the 20yr bond as it dropped by 2bps, to 13.17% (only 3bps lower than cut-off rate at last auction). The rest of the curve had similar moves, losing about 2-4bps.

BILLS: Although relatively quiet, secondary market trading was driven by the auction yesterday as market players aggressively paid for the 91day bill (up for auction today) dragging it lower by 35bps to 11.95% yield. The rest of the curve also shifted a tad lower taking the average yields to 12.20 (-6bps).

MONEY MARKET: OBB and ON rates remained unchanged at 10.50%.

CBN RDAS AUCTION: CBN offered $400 million and sold $399.981 million. Marginal rate was N155.70/US$ (excluding CBN 1% Commission). 22 banks bid. Highest bid rate was N158.82/US$.

US: Against most market expectations, the Federal Open Market Committee (FOMC) reduced its quantitative easing (QE) program by USD 10bn to USD 75bn at its December meeting, evenly split between USD 5bn of mortgage-backed securities (MBS) and USD 5bn US of Treasuries (USTs). This is against our expectation of tapering in June 2014 by USD 20bn and the market’s expectation of a USD 10bn taper in March 2014.

EUROPE: European Union finance ministers broke a deadlock on how to deal with failing banks, delivering the agreement lenders demanded before a summit today in Brussels. The finance chiefs pledged to create a 55 billion-euro ($75 billion) industry-financed resolution fund over the next 10 years, backed an agency to make decisions on handling failing banks and agreed on cost-sharing procedures. The deal on the Single Resolution Mechanism took shape over two days in Brussels that pitted big nations against small ones, euro members against those outside the currency bloc, and Germany’s desire to shield its taxpayers against European Central Bank calls for central control of struggling lenders.

CHINA: China’s Yuan fell as the central bank weakened the daily fixing by the most in more than seven months after the Federal Reserve said it would start cutting stimulus that has fueled fund flows to emerging markets. The Yuan dropped 0.04 percent to 6.0744 per dollar as of 10:11 a.m. in Shanghai, China Foreign Exchange Trade System prices show. It reached 6.0703 on Dec. 10, the strongest since the government unified the market and official exchange rates at the end of 1993, and has strengthened 2.6 percent this year.

COMMODITIES: WTI oil traded near the highest price in a week after crude stockpiles declined in the U.S. and the Federal Reserve said it will reduce stimulus as the economic outlook improves. WTI for January delivery, which expires today, was at $97.71 a barrel, down 9 cents, in electronic trading on the New York Mercantile Exchange at 2:03 p.m. Singapore time.

Indicative Currency Exchange Rates
Bid         Offer

EURUSD       1.3681       1.3731
GBPUSD        1.6372      1.6422
USDJPY         103.86     104.26
USDCHF        0.8941     0.8971
GBPEUR        1.1967       1.1977
USDZAR      10.3690     10.5190
USDNGN      159.00      159.30
JPYNGN       1.5309       1.5809
CHFNGN     177.83        181.83
EURNGN     217.53       221.53
GBPNGN     260.31       264.31
ZARNGN     15.33          17.33

Commodities
WTI oil traded near the highest price in a week after crude stockpiles declined in the U.S. and the Federal Reserve said it will reduce stimulus as the economic outlook improves. WTI for January delivery, which expires today, was at $97.71 a barrel, down 9 cents, in
electronic trading on the New York Mercantile Exchange at 2:03 p.m. Singapore time.

Interest rates
NIBOR (%)                      LIBOR (%)

O/N             10.7917           USD 1 month       0.1668
7 Day           11.0417           USD 2 month       0.2140
30 Day        11.2917            USD 3 month      0.2451
60 Day        11.5417            USD 6 month      0.3469
90 Day        11.7917            USD 12 month    0.5781
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
     159.95/05   159.00/10     159.85/95    159.00/10

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