A Review of the Nigerian Energy Industry

Financial market update

finance27 January 2014, Sweetcrude, Houston – Local and international financial market products and services update.
NIGERIA: Donald Kaberuka, President of the African Development Bank Group (AfDB) says he is quite bullish about the Nigerian economy, an assessment, he says is also shared by the bank. Kaberuka stated that the Nigerian economy could record as much as 7 percent growth in 2014, pushed by ongoing reforms in the power, agriculture sectors, among others.

BONDS: Quiet week in the bond space last week as market traded flat in the last four days except for the major move of Friday which saw yields a tad higher on all maturities, taking average yields to 13.07%.

BILLS: We opened Friday morning with CBN offering 41D and 48D bills worth 100bio however no sale was made. Yields inched higher across the mid curve. However, this was offset by the decline in the long end of the curve. We closed last week at 11.77%.

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

COMMODITIES: West Texas Intermediate sustained its biggest weekly gain of the year as freezing temperatures in the U.S. boosted demand for heating oil. WTI for March delivery was up at $96.73 a barrel, up 9 cents, on the New York Mercantile Exchange.

FX: The interbank market ended last week on a very bullish note. CBN’s circular late Friday on the removal of the $250k limit on BDCs is further going to put pressure on the Naira. This is on the back of their pronouncement at last week Tuesday’s MPC briefing to address the significant gap between the interbank level and parallel market and the effect on core inflation by improving the supply to that segment of the market. Market had already seen a squeeze in USD liquidity towards the end of last week and traded as high as 161.75/85 – against the week’s open of 159.70/80 – before a CBN intervention dipped rates to close at the 160 level and this new development is expected to aggravate the situation as we should start seeing a convergence with the parallel market.

US: Labor union membership as a percentage of the U.S. work force stabilized at 11.3 percent in 2013 after several years of declines, government figures showed on Friday. In an era of diminished power for unions in the economy, the Labor Department reported that there were 14.5 million union members last year, about level with 2012. By comparison, in 1983, the first year for which the department published comparable data, union membership was 20.1 percent, with 17.7 million U.S. union workers.

EU: The head of the International Monetary Fund (IMF) has warned that deflation remains a real risk to economic recovery in the eurozone. Despite signs of recovery across the world, Christine Lagarde said that potential risks must not be ignored. One of these was the fact that eurozone inflation, at 0.8%, remained way below the 2% target set by the European Central Bank (ECB).

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                          11.4583
60 Day                          11.7917
90 Day                          12.0417
USD 1 Month               0.2107
USD 2 Months             0.2450
USD 3 Months             0.2750
USD 6 Months             0.3677
USD 12 Months           0.5360

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             12.04
4 years             31-Aug-17             12.49
5 years             30-May-18            12.51

Indicative Currency Exchange Rates
Bid          Offer

EURUSD         1.3686        1.3736
GBPUSD          1.6519        1.6569
USDJPY           102.41        102.81
USDCHF          0.8946      0.8976
GBPEUR          1.2070       1.2080
USDZAR           11.196        11.346
USDNGN         160.20       160.50
JPYNGN          1.5643        1.6143
CHFNGN         179.07        183.07
EURNGN         219.25        223.25
GBPNGN          264.63      268.63
ZARNGN            14.31         16.31

                                Hi               Low               Close       Prev.Close
USD/NGN     161.75/85      160.18/28      160.40/50     160.18/28

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