A Review of the Nigerian Energy Industry

Financial market update

Finance 120 December 2013, Sweetcrude, Houston – Local and international financial market products and services update.
FX Market in Focus: The local units gained about 130 points yesterday on the back of CBN’s intervention into the market. The pair opened to a bullish run partly due to the recurring demand from the closure of CBN RDAS auction and an overreaction of traders to the Fed’s decision to start tapering next month. There were no offshore USD outflow, rather, some took advantage of the high rates to sell USD into the market, but the pair still traded the 160 levels reaching a high of 160.85/95 till CBN intervened and helped crash rates to a close of 158.45/55. We expect some stability in rates till year end, though we still expect some demand to keep sprinkling in

BONDS: The market opened weaker than closing levels and we saw prices drop even further intraday as selling pressure from speculative locals persisted, however slowing down at mid day. Yields closed about 15bps higher than yesterday’s closing levels. The move higher was more pronounced in the shorter end of the curve as bonds above the 15yr maturity closed only 5-8bps higher than Wednesday’s close.

T-BILLS: Yields spiked higher (40-60bps) across the curve on open yesterday as the market traded nervously on the back of the FEDs decision last night. However, this move was short-lived as market retraced to close only 15bps higher than Wednesday’s close as some demand started to sip through towards the end of the day. Another surprise hit the market yesterday as the 364d auction cut-off came in at 12.50% (vs. 11.66% in previous auction) with the CBN selling almost double the amount on offer showing off more aggressive means to manage liquidity.

MONEY MARKET: OBB rate remained unchanged at 10.50% and ON rates increased by 25bps to 10.75%.

COMMODITIES: WTI oil fell from a two-month high as investors sold contracts to profit from the biggest price surge in more than a week. WTI for February delivery slid to $98.65 a barrel in electronic trading on the New York Mercantile Exchange, and was at $98.77

NIGERIA: Nigeria’s finance minister presented a 4.64 trillion naira ($29 billion) budget to parliament for 2014 on Thursday, raising its benchmark oil price assumption to $77.5 a barrel in line with lawmakers’ suggestions, which will free up more money for spending..

US: The Federal Reserve will probably reduce its bond purchases in $10 billion increments over the next seven meetings before ending the program in December 2014, economists said.

EU: The European Union lost its top credit rating from Standard & Poor’s, which said the group’s cohesion has weakened and its financial profile has deteriorated.S&P says credit worthiness of 28 EU states declined. EU budgetary talks have become contentious

CHINA: The People’s Bank of China (PBoC) weakened the Chinese Yuan (CNY) by 0.13% at the first daily fix following the Fed’s decision to taper its QE. The step reflected broader US dollar (USD) strength in the FX markets and widened the gap between the fix and the onshore spot rate.

Macro Economic indicators
Inflation rate (yoy) for Nov. 2013            7.9%
Monetary Policy Rate current                  12%
FX Reserves ($) as at Dec. 18                  44.158

Money Market Highlights
CURRENT %                 PREVIOUS %
O/N                   10.7917                              10.7917
7 Day                 11.0000                             11.0417
30 Day              11.5417                               11.2917
60 Day              11.8333                              11.5417
90 Day              12.0833                             11.7917

CURRENT %                  PREVIOUS %
USD 1 Month      0.1645                            0.1668
USD 2 Months    0.5145                            0.2140
USD 3 Months    0.2458                           0.2451
USD 6 Months    0.3479                           0.3469
USD 12 Months  0.5806                           0..5781

TBills Highlights
Tenor                 Maturity            Yield          Change (bps)
91 days             30-Mar-14          11.68               26
182 days           05-Jun-14          11.63                17
364 days          04-Dec-14          12.41                14
2 years             23-Apr-15           12.71                21
4 years             23-Apr-17           12.58               26
5 years             30-May-18         12.57                19

Indicative Currency Exchange Rates
Bid           Offer
EURUSD            1.3637         1.3687
GBPUSD             1.6351         1.6401
USDJPY              104.41         104.81
USDCHF            0.8988        0.9018
GBPEUR             1.1990        1.2000
USDZAR            10.3958     10.5458
USDNGN            158.45        158.75
JPYNGN              1.5176        1.5676
CHFNGN            176.29        180.29
EURNGN            216.08       220.08
GBPNGN            259.08       263.08
ZARNGN              15.24          17.24

Hi            Low           Close          Prev.Close
 159.85/95  160.85/95   158.00/10   158.40/50

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