A Review of the Nigerian Energy Industry

Financial market update

finance15 January 2014, Sweetcrude, Houston – Local and international financial market products and services update.
NIGERIA: Nigeria’s inflation rate increased for a second month to 8 percent in December, boosted by non-food costs. Inflation accelerated from 7.9 percent in November, the Abuja-based National Bureau of Statistics said in an e-mailed statement today. The Central Bank of Nigeria has kept its benchmark interest rate at 12 percent since October 2011 even as the inflation rate stayed below 10 percent last year, meeting the bank’s target.

BONDS: Secondary market was quiet on the back of nervousness of today’s bond auction. Average yields closed a tad higher across board.

BILLS: Quiet start to the week, perhaps setting the mood for the day off yesterday (Maulid day). The curve closed steeper on Monday as we saw some sellers in the long end of the curve, taking profit from the winnings in the 364 day PMA and driving the yield back towards cut-off level (13.60% yield). This sentiment helped push all maturities above the 6months tenor by 15-30 bps.

MONEY MARKET: OBB and ON rates both increased to 10.50% and 10.75% respectively.

FX: Slight depreciation for the local unit on Monday despite oil inflow as demand for the greenback remained prevalent in the interbank market. Market opened at 159.45/55 and went bullish from start of trading, but we saw a resistance at 160.05/15 as news of oil inflow pushed rates south to the 159 level. The pair traded tightly thereafter, but rates closed for the Muslim holiday a few points above previous close due to the high demand seen. Expectation is for rates to go higher as market resumes after the one day Muslim holiday, barring any major oil inflow.

CBN RDAS AUCTION: CBN offered $450 mio and sold $349.995 mio at Monday’s RDAS auction. Lowest successful rate was maintained at 155.72 (1% commission excluded) as it’s been for the last 3 auctions and 19 banks participated.

US: One regional Federal Reserve Bank continued to push for a cut in the U.S. central bank’s emergency lending rate in December, while three others renewed a request to hike it, minutes of Fed deliberations released on Tuesday showed. The Minneapolis Federal Reserve Bank asked the Fed’s board ahead of a December 17-18 policy meeting to lower the discount rate to 0.5 percent from 0.75 percent, while the Philadelphia, Kansas City and Dallas Fed banks requested an increase to 1.0 percent, the minutes said.

EU: Germany’s economy expanded less than forecast last year even as it led the euro area out of the region’s longest-ever recession. Gross domestic product increased 0.4 percent from 2012, when it gained 0.7 percent, the Federal Statistics Office said in Berlin today. Economists forecast growth of 0.5 percent, according to reports. The nation’s budget deficit was 0.1 percent of GDP.

CHINA: China’s broadest measure of new credit fell in December while money-supply growth and new Yuan loans trailed estimates amid a cash crunch and government efforts to curb speculative lending. Aggregate financing was 1.23 trillion Yuan ($204 billion), the People’s Bank of China said today in Beijing. That compared with 1.63 trillion Yuan a year earlier. China’s foreign-exchange reserves, the world’s largest, rose to a record $3.82 trillion at the end of December from September’s $3.66 trillion.

COMMODITIES: WTI swung between gains and losses amid speculation U.S. crude stockpiles declined and signs the world’s biggest oil consumer will sustain its economic growth. WTI for February delivery was at $92.54 a barrel in electronic trading on the New York Mercantile Exchange, down 5 cents.

Macro Economic Indicators
Inflation rate (yoy) for Dec. 2013            8.0%
Monetary Policy Rate current                   12%
FX Reserves (Bn $) as at Dec. 19             44.104

Money Market Highlights

O/N                                           10.6250
7 Day                                         10.8750
30 Day                                      11.1250
60 Day                                      11.4167
90 Day                                      11.7083
USD 1 Month                           0.1590
USD 2 Months                         0.2055
USD 3 Months                         0.2368
USD 6 Months                         0.3355
USD 12 Months                        0.5681

Benchmark Yields
Tenor                    Maturity             Yield (%)
91 days                     10-Apr-14               11.48
182 days                  05-Jun-14               12.06
364 days                  08-Jan-15               13.13
2 years                     23-Apr-15               12.48
4 years                     31-Aug-17               12.56
5 years                     30-May-18             12.56

Indicative Currency Exchange Rates
                            Bid               Offer
EURUSD           1.3636           1.3686
GBPUSD           1.6400           1.6450
USDJPY            104.29           104.69
USDCHF          0.9054           0.9084
GBPEUR           1.2027           1.2037
USDZAR          10.8749         11.0249
USDNGN          159.48           159.78
JPYNGN           1.5292            1.5792
CHFNGN          176.14            180.14
EURNGN         217.47            221.47
GBPNGN          261.55           265.55
ZARNGN           14.66             16.66

                               Hi               Low            Close        Prev.Close
USD/NGN    160.05/15    159.45/55     159.58/68     159.40/50

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