A Review of the Nigerian Energy Industry

Financial market update

finance24 January 2014, Sweetcrude, Houston – Local and international financial market products and services update.
NIGERIA: Sanusi says Nigeria may raise MPR from 12%, CRR to 100%.The CBN Governor said he has “no fears” of tightening monetary policy further to keep inflation down and to stabilize the currency. The bank can increase its key interest rate from 12% and the cash reserve requirement on public sector funds to 100% if needed, he said. “I don’t think we are at the end of possible tightening cycles, but I do think that the scope for further tightening is getting narrower and narrower,” he said. “We do need to rely more on other instruments.

BONDS: Mixed sentiments across the curve as the very short end of the curve witnessed slight increase in yields, mid bucket however saw decline in yields while the long end of the curve traded flat. Overall average yield closed at 13%, a basis point decline from Wednesday.

BILLS: A slight reversal of Wednesday’s bearish move was seen yesterday as the average yield declined on the back of the OMO and Primary market auctions result of yesterday. The CBN entered the market yesterday offering NGN50B each of the 28D and 35D and sold a sum of NGN 105.31B at 11.20% and 11.40% discount respectively. PMA of Wednesday also saw cut-off result for the 91d, 182d and 364d bills at 10.75% (-15bps), 11.94% (+9bps) and 12.22% (+22bps) discount respectively. Liquidity still remains high in the system.

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

COMMODITIES: West Texas Intermediate crude traded near its highest closing level in three weeks before weekly government data on U.S. inventories amid signs the economic recovery in developed nations is gaining strength. WTI for March delivery was 37 cents higher at $97.10 a barrel in electronic trading on the New York Mercantile Exchange.

FX: USDNGN was well bid yesterday with USD inflow by an oil major not significant enough to support the local currency amidst the overwhelming level of demand seen. The pair lost about 71 points from previous close and closed at the 160 level for the first time this week. The market anticipates more significant inflows next week and expects rates to retrace to the 159 level.

US: U.S. home re-sales rose in December after three straight months of declines, showing some resilience in the housing market recovery despite higher mortgage rates. While other data on Thursday showed a marginal rise in first-time applications for unemployment benefits last week and a slowdown in factory activity this month, the deterioration was not enough to change the picture of an improving economy.

CHINA: China’s urban unemployment rate ticked up slightly to 4.05 percent at the end of December 2013 from 4.04 percent three months earlier, the country’s labor ministry said on Friday. Li Zhong, spokesman of the Human Resources and Social Security Ministry, told a media conference that China’s jobless rate was around 4.1 percent for the whole of 2013. China aims to keep its registered urban unemployment rate below 4.6 percent in 2014, unchanged from its target for 2013.

Macro Economic Indicators
Inflation rate (yoy) for Dec. 2013          8%
Monetary Policy Rate current              12%
FX Reserves (Bn $) as at Jan. 22     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                    0.21571
USD 2 Months                  0.24857
USD 3 Months                  0.28000
USD 6 Months                  0.36629
USD 12 Months                0.53814

Benchmark Yields
Tenor              Maturity        Yield (%)

91 days              17-Apr-14          10.79
182 days           05-Jun-14          11.78
364 days           08-Jan-15          12.87
2 years               23-Apr-15          12.02
4 years               31-Aug-17          12.38
5 years               30-May-18         12.41

Indicative Currency Exchange Rates
Bid         Offer
EURUSD      1.3686       1.3736
GBPUSD       1.6652       1.6702
USDJPY        103.36       103.76
USDCHF       0.9117       0.9147
GBPEUR       1.2167        1.2177
USDZAR      10.9943    11.1443
USDNGN      159.68       159.98
JPYNGN       1.5449        1.5949
CHFNGN      175.15         179.15
EURNGN      218.54        222.54
GBPNGN      265.90       269.90
ZARNGN        14.52         16.52

Hi               Low            Close       Prev.Close
    160.20/30   159.30/40    160.18/28    159.47/57

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