A Review of the Nigerian Energy Industry

Financial market update

Financial markets21 January 2014, Sweetcrude, Houston – Local and international financial market products and services update.

NIGERIA: The 2014 budget envisaged a net collectible revenue of N7.50 trillion, the Minister of Finance and the Coordinating Minister for the Economy, Dr Ngozi Okonjo- Iweala, said at the public presentation of the budget on Monday. She said that N3.73 trillion of the expected collectible revenue would be used to fund the 2014 budget, which focuses on boosting job creation and inclusive growth.

BONDS: Slightly bullish in the secondary market yesterday as average yield closed lower by 2bps to 13.10%. Trading was mixed with yields declining on the short-end of the curve while yields expanded marginally on the long-end of the curve.

BILLS: Average yield fell by 8bps to 11.55% as the market continued its bullish trend, driven by the significant levels of liquidity in the system. Yields fell on most maturities, with the 45-day bill seeing particular interest as its yield declined by 52bps to 10.74%. Primary market auction is coming up on Wednesday as the government offers N203billion worth of 91D, 182D and 364D T-bills.

MONEY MARKET: OBB and ON rates both closed at 10.25%.

FX: Slight appreciation for the pair yesterday as significant Left Hand Side flows helped support the Naira. Market opened to a bullish run and traded a high of 160.10/20 before retracing to the 159 levels after being flushed with USD liquidity from few counters in the market and an oil market. The pair traded a low of 159.30/40 before some demand in the market took rates slightly back up to close at about 10 points below the opening level. The first MPC meeting of the year started yesterday with the conclusions expected to be announced today. A hike in CRR on public sector deposits is expected as CBN looks to curb the excess Naira liquidity in the banking system.

CBN RDAS AUCTION: CBN offered $350 million and sold $349.99 million. Marginal rate was $/N 155.74 (excluding 1% commission) with 20 banks in participation.

EU: The International Monetary Fund is widely expected to raise its outlook for the UK on Tuesday, pushing up the country’s growth forecasts by more than for any other major economy. The Washington-based fund has been a critic of the UK’s over-dependence on consumers as well as the government’s “Help to Buy” housing market scheme. But it will bring a welcome boost to Chancellor George Osborne when it updates its World Economic Outlook from last October’s forecasts. Back then it predicted UK national output would rise 1.9% in 2014 but is now expected to predict growth of 2.4%, according to reports.

CHINA: China’s economy narrowly missed expectations for growth to hit 14-year lows in 2013, though some economists say a cool down will be inevitable this year as officials and investors hunker down for difficult reforms. The chance that the world’s second-largest economy may decelerate in coming months was underscored on Monday by data that showed growth in investment and factory output flagged in the final months of last year.

COMMODITIES: West Texas Intermediate crude fell amid speculation a slowing economy in China will reduce fuel demand in the country, the world’s second-biggest oil consumer. WTI for March delivery, the most active contract, declined as much as 94 cents to $93.65 a barrel in electronic trading on the New York Mercantile Exchange and was at $94.29.

Macro Economic Indicators
Inflation rate (yoy) for Dec. 2013             8%
Monetary Policy Rate current                   12%
FX Reserves (Bn $) as at Jan. 17            43.241

Money Market Highlights

O/N                                            10.5000
7 Day                                          10.8333
30 Day                                       11.0833
60 Day                                       11.3750
90 Day                                       11.6667
USD 1 Month                            0.1570
USD 2 Months                          0.2021
USD 3 Months                          0.2371
USD 6 Months                          0.3341
USD 12 Months                        0.5721

Benchmark Yields
Tenor                  Maturity           Yield (%
91 days                  17-Apr-14               11.01
182 days               05-Jun-14               11.73
364 days               08-Jan-15               12.88
2 years                   23-Apr-15               12.20
4 years                  31-Aug-17                12.50
5 years                  30-May-18              12.57

Indicative Currency Exchange Rates
Bid        Offer

EURUSD                1.3550      1.3600
GBPUSD                 1.644        1.649
USDJPY                  104.5        104.9
USDCHF                0.9117       0.9147
GBPEUR                1.2133       1.2143
USDZAR              10.8448    10.9948
USDNGN               159.40      159.70
JPYNGN                1.5254       1.5754
CHFNGN               174.84       178.84
EURNGN              215.99       219.99
GBPNGN              262.05       266.05
ZARNGN               14.70          16.70

Hi              Low          Close         Prev.Close
     160.10/20   159.30/40  159.60/70    159.70/80

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