A Review of the Nigerian Energy Industry

Financial market update

finance03 January 2014, Sweetcrude, Houston – Local and international financial market products and services update.
FX Market in Focus: USDNGN was well offered yesterday due to major inflow from state owned oil company and an oil major. The oil inflow estimated at over $400m pushed rates south helping Naira gain about 120 points from previous close. We expect more oil inflows in the first two weeks of the month as oil majors fund their Naira obligations. With RDAS auctions poised to resume next week Monday, we also expect a reduction in USD demand in the market. Thus expectation is for rates to trade current levels in the short term.

TBILLS: The New Year opened with somewhat exciting moves. Although still illiquid, we saw a swift reversal in the “December-long” bearish sentiment, as the market took in a lot of players. This move saw yields move lower by 20- 70bps across most maturities on the curve taking the average yield to 12.01% (- 30bps).

MONEY MARKET: OBB and ON rates at 10.25% and 10.50% respectively.

COMMODITIES: WTI crude traded near the lowest level in a month amid speculation that the Federal Reserve will further curb stimulus measures after signs of improvement in the U.S. economy. WTI for February was at $95.31 a barrel, down 13 cents, in electronic trading on the New York Mercantile Exchange at 2:17 p.m. Singapore time. It slipped $2.98 to $95.44 a barrel yesterday, the lowest since Dec. 2.

NIGERIA: Nigerian President Goodluck Jonathan says his government will create more than 200,000 affordable mortgages over five years and introduce rent-to-own options for low-income housing to address a massive shortage in Africa’s most populous nation.

US: Jobless claims were roughly in line with expectations at 339k considering last week’s revision. The number is still distorted by the holidays. The Market US PMI was slightly better than expected as was the ISM Manufacturing at 57 versus 56.8 expected and construction spending at 1%, much higher than the 0.6% expected. The market rebounded slightly with 10 year notes back below the 3% yield again.3 month USD Libor was 0.325bp higher at 0.24285.

EUROPE: The Euro zone manufacturing PMI at 52.7 was in line with expectations, but behind the overall numbers are discrepancies between nations. Spain, Italy, Ireland and Germany all above 50 were on the upside while France was lower than expected at 47, deep into contraction territory.

CHINA: China’s benchmark money-market rate headed for a second weekly drop, signalling cash supply in the financial system exceeded demand even after the central bank drained funds. The People’s Bank of China withdrew a net 29 billion Yuan ($4.8 billion) this week, while skipping the sales of both 7 and 14-day reverse repurchase contracts.

Macro Economic Indicators
ation rate (yoy) for Nov. 2013             7.9%
Monetary Policy Rate current             12%
FX Reserves (Bn $) as at Dec. 31        43.610

Money Market Highlights

O/N                                      10.5833
7 Day                                    10.8333
30 Day                                  11.0833
60 Day                                  11.3333
90 Day                                  11.7083
USD 1 Month                       0.16830
USD 2 Months                     0.21250
USD 3 Months                     0.24285
USD 6 Months                     0.34640
USD 12 Months                    0.58260

Benchmark Yields
Tenor                     Maturity               Yield (%)
91 days                      27-Mar-14               11.68
182 days                    05-Jun-14               11.57
364 days                    04-Dec-14               12.35
2 years                        23-Apr-15               12.71
4 years                        31-Aug-17               12.58
5 years                        30-May-18              12.57

Indicative Currency Exchange Rates
                         Bid                Offer
EURUSD       1.3649             1.3699
GBPUSD        1.6433             1.6483
USDJPY         104.30            104.70
USDCHF        0.9002           0.9032
GBPEUR        1.2040            1.2050
USDZAR        10.6427           10.7927
USDNGN       158.75             159.05
JPYNGN         1.5221             1.5721
CHFNGN        176.35            180.35
EURNGN        216.68            220.68
GBPNGN         260.87          264.87
ZARNGN        14.92              16.92

                              Hi                Low            Close        Prev.Close
USD/NGN   159.90/00     158.05/15     158.75/85     159.98/08

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