A Review of the Nigerian Energy Industry

Financial market update

Financial markets23 January 2014, Sweetcrude, Houston – Local and international financial market products and services update.
NIGERIA: Nigeria has put $300 million worth of World Bank aid money into a mortgage-backed guarantee that it hopes will boost lending via the creation of a secondary market, the finance ministry said on Wednesday. Nigeria currently suffers a woeful housing shortage, with somewhere between 16 and 20 million new homes needed just to keep up with current demand, according to official figures. The mortgage debt-to-GDP ratio in Nigeria is under 0.5 percent, compared with 72 percent in the U.S. and over 30 percent in Malaysia and South Africa, government figures show

BONDS: Bond prices opened lower in the secondary market yesterday, although this was short lived as the market closed flat at 13.01% average yield. Yields fell massively on the April 15s while the rest of the curve saw an increase in yields

BILLS: Bearish momentum was sustained in yesterday’s trading as the average yield rose slightly by 2bps. Yields performance was mixed across the curve as the short dated as the 134D – 351D suffered selling pressure, however the mid-term saw some buying pressure.

MONEY MARKET: OBB and ON rates remained at 10.15% and 10.25% respectively.

FX: Pair was tightly traded yesterday within a 27 points range with the market mostly flow driven. Naira slightly depreciated for the first time this week losing 17 points from previous close. Expectation is for the pair to continue to trade the present 159 levels within a tight range till we start seeing the customary month-end oil inflows. The FX market saw no immediate impact due to the MPC’s hike on CRR for public sector deposits as the market still remains swash with excess Naira liquidity.

CBN RDAS AUCTION: CBN offered $400 million and sold $390.03 million at Wednesday’s RDAS auction. Marginal rate increased to 155.75 (1% commission excluded) and 18 banks participated

COMMODITIES: West Texas Intermediate crude rose to a three-week high on speculation that U.S. distillate fuel supplies slid as falling temperatures bolstered heating demand. WTI for March delivery increased $1.76 to $96.73 a barrel on the New York Mercantile Exchange. It was the highest settlement since Dec. 31.

US: The Obama administration warned Congress on Wednesday that the government would likely run out of borrowing authority needed to help pay its bills by late February if lawmakers do not swiftly raise the federal debt ceiling. Previously, the administration had projected the borrowing authority could last until as late as early March, but the Treasury Department said it now believed Congress had a more narrow window in which to act.

CHINA: Activity in China’s factory sector contracted in January for the first time in six months, a preliminary survey showed on Thursday, pointing to a weak start for the economy in 2014 as policymakers seek to curb high debt levels to head off financial risks.

EU: European Central Bank President Mario Draghi cautioned Wednesday against undue optimism for the euro zone economy, saying there still were significant risks of setbacks to the recovery. Draghi said in an interview that he is not too concerned about either inflation or deflation.

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               0.1580
USD 2 Months             0.2043
USD 3 Months             0.2371
USD 6 Months             0.3341
USD 12 Months           0.5711

Benchmark Yields
Tenor                 Maturity         Yield (%)

91 days                 17-Apr-14           11.00
182 days              05-Jun-14           11.78
364 days              08-Jan-15           12.81
2 years                  23-Apr-15          11.97
4 years                  31-Aug-17          12.38
5 years                  30-May-18         12.42

Indicative Currency Exchange Rates
Bid             Offer

EURUSD        1.3549           1.3599
GBPUSD         1.6565           1.6615
USDJPY          104.31           104.71
USDCHF        0.9105           0.9135
GBPEUR        1.2226           1.2236
USDZAR        10.9167         11.0667
USDNGN        159.47           159.77
JPYNGN         1.5288          1.5788
CHFNGN        175.15            179.15
EURNGN       216.07           220.07
GBPNGN        264.16           268.16
ZARNGN          14.61             16.61

                                Hi               Low            Close        Prev.Close
USD/NGN       159.62/72     159.35/45   159.47/57      159.30/40

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