A Review of the Nigerian Energy Industry

Financial market update

Finance 117 Janaury 2014, Sweetcrude, Houston – Local and international financial market products and services update.
NIGERIA: The Federal Ministry of Finance on Thursday announced that the Federation Accounts Allocation Committee (FAAC) had shared N581.498 billion to the three tiers of government for December 2013. The Minister of State for Finance, Dr Yerima Ngama, announced this in Abuja when he addressed newsmen on the outcome of the FAAC meeting which ended on Thursday. Ngama said that the amount shared included N64.725 billion from Value Added Tax (VAT), N7.617 billion refunded by the Nigerian National Petroleum Corporation (NNPC) and N35.549 billion from SURE-P.

BONDS: The Aug 2016 bond cut-off at 13.10% at the auction held on Wednesday was much lower than it was priced in the secondary market pre-auction. This low cut-off may be attributed to the huge demand from the pension funds as we saw bids going in as low as 10%. As such, the market adjusted slightly with yields settling a tad lower across on the short to medium end of the curve. The 2030 bond however remained flat from opening level as barely any trades were dealt on it.

BILLS: Yet again, the Central Bank keeps its hands from the market leaving the system flush with liquidity currently above N 600 billion. We have more OMO maturity today amounting to N 419 billion; a quiet Central Bank today may just be an indication of something interesting at the upcoming MPC meeting next week. Yesterday’s trading saw yields lower by 5-20bps across the curve as the market remained bullish.

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

COMMODITIES: WTI crude headed for the first weekly gain since December amid speculation that U.S. unemployment and manufacturing data signaled the world’s biggest oil consumer will sustain its economic growth. WTI for February delivery was at $94.11 a barrel in electronic trading on the New York Mercantile Exchange, up 15 cents.

FX: It was a Bullish market yesterday despite inflows from two oil majors. Market went up as it opened as the greenback sales by the oil major were not significant enough to support the local unit. Naira lost about 63 points from previous close and traded a high of 159.96/06. With appetite for USD still very persistent in the market, expectation is for rates to soon break the resistance at 160.00 till we start seeing another round of major oil inflows by month-end.

US: The number of Americans filing new claims for unemployment benefits fell for the second consecutive week last week, suggesting a sharp step-down in job growth in December was likely to be temporary. The better labour market tone was also captured by a survey on Thursday showing acceleration in manufacturing activity in the Mid-Atlantic region, accompanied by a rise in factory jobs.

EU: Euro zone inflation slowed in December, the European Union’s statistics office confirmed on Thursday, in what the European Central Bank attributed last week to a one-off change in the method of calculating price growth in Germany. Consumer prices in 17 countries sharing the euro last year rose 0.3 percent on the month, putting the annual inflation rate at 0.8 percent, down from 0.9 percent in November, but a tad above 0.7 percent in October.

CHINA: China’s central bank will use various tools to adjust liquidity in a flexible way to help maintain appropriate growth in credit and social financing, a senior central bank official said in remarks published on Friday. Rising money market rates and bond yields in recent months indicate the People’s Bank of China is committed to curbing high debt levels in the economy to head off potential financial risks, but there is little sign of abrupt policy tightening.

Macro Economic Indicators
Inflation rate (yoy) for Dec. 2013             8.0%
Monetary Policy Rate current                   12%
FX Reserves (Bn $) as at Jan. 14           43.242

Money Market Highlights

O/N                                    10.5833
7 Day                                  10.8333
30 Day                                11.0833
60 Day                                11.3750
90 Day                                11.6667
USD 1 Month                     0.1570
USD 2 Months                   0.2013
USD 3 Months                   0.2364
USD 6 Months                   0.3346
USD 12 Months                 0.5716

Benchmark Yields
Tenor                     Maturity             Yield (%)
91 days                      17-Apr-14               11.02
182 days                    05-Jun-14              11.91
364 days                   08-Jan-15               12.97
2 years                       23-Apr-15               12.27
4 years                       31-Aug-17               12.60
5 years                       30-May-18             12.62

Indicative Currency Exchange Rates
                              Bid        Offer
EURUSD             1.361        1.366
GBPUSD              1.6334     1.6384
USDJPY               104.36     104.76
USDCHF             0.9049     0.9079
GBPEUR             1.2001      1.2011
USDZAR             10.901      11.051
USDNGN            159.43     159.73
JPYNGN              1.5277     1.5777
CHFNGN             176.19     180.19
EURNGN            216.98     220.98
GBPNGN            260.41     264.41
ZARNGN              14.63       16.63

                                 Hi                Low              Close        Prev.Close
USD/NGN       159.98/08     159.20/30     159.93/03     159.30/40

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