A Review of the Nigerian Energy Industry

Financial market update

Finance 129 January 2014, Sweetcrude, Houston – Local and international financial market products and services update.
NIGERIA: The Nigerian central bank plans to shift 7% of its $43 Billion of reserves into Yuan from dollars, the deputy governor, Kingsley Moghalu, said yesterday, as the Chinese currency gains greater prominence in global trade. About 85% of Nigeria’s reserves are held in dollars. Nigeria is joining countries including South Korea in adding the Yuan to reserves as China opens up its capital market and promotes the use of the currency in international trade and financing.

BONDS: Bond market continued its bearish momentum as all maturities came under selling pressure driving average yields higher by 15bps. Yields rose across the curve with the greatest increase seen at the belly of the curve (3.25Yrs- 8Yrs).

BILLS: Just as in the Bond market, the bills market also sustained its bearish momentum as the average yields rose further by 27bps to 12.10%. Yields performance was uniform across the curve as all securities suffered selling pressure due to the OMO announcement. CBN sold OMO bills of NGN36.91B on 121D and NGN77.22B on 142D at 12.05% and 12.10% discount respectively.

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

COMMODITIES: WTI retreated from the highest price in four weeks after an industry report showed crude stockpiles increased in the U.S., the world’s biggest oil consumer. WTI for March delivery fell as much as 40 cents to $97.01 a barrel in electronic trading on the New York Mercantile Exchange, and was at $97.27 at 2:43 p.m. Singapore time

FX: USDNGN was still well bid and further depreciated yesterday as Naira remained under pressure. There was about $41 million inflow from an oil major and a CBN intervention towards market close but these provided little respite with the overwhelming level of demand in the market. Rates went bullish from opening and traded the 163 level but retraced to the 162 level partly due to the oil inflow and a late intervention by CBN to close at 162.80/90 – 50 points from previous close.

US: President Barack Obama urged Congress to back two of the top priorities of U.S. multinational corporations thereby giving broader authority to his administration to negotiate trade deals along with changes to immigration laws. The president, in his annual State of the Union address last night, called on Congress to allow an expedited vote on trade agreements as the U.S. tries to complete negotiations with the European Union and Pacific nations.

UK: The UK economy grew by 1.9% in 2013, its strongest rate since 2007, according to the Office for National Statistics (ONS). But growth in gross domestic product (GDP) for the fourth quarter slipped to 0.7%, down from 0.8% in the previous quarter, it said. Economic output is still 1.3% below its 2008 first quarter level.

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              0.15900
USD 2 Months            0.19915
USD 3 Months            0.23610
USD 6 Months            0.33200
USD 12 Months           0.57100

Benchmark Yields
Tenor            Maturity          Yield (%)

91 days            17-Apr-14            11.08
182 days          05-Jun-14           12.08
364 days          22-Jan-15           13.43
2 years             23-Apr-15            12.28
4 years             31-Aug-17             12.81
5 years             30-May-18           12.85

Indicative Currency Exchange Rates
Bid         Offer

EURUSD          1.3664      1.3714
GBPUSD          1.6578       1.6628
USDJPY           103.22      103.62
USDCHF          0.8991      0.9021
GBPEUR          1.2133       1.2143
USDZAR           10.96        11.11
USDNGN        162.80      163.10
JPYNGN          1.5772       1.6272
CHFNGN         181.07      185.07
EURNGN        222.45      226.45
GBPNGN        269.89      273.89
ZARNGN         14.85        16.85

                             Hi              Low            Close        Prev.Close
USD/NGN   163.37/47    162.35/45    162.80/90   162.30/40

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