A Review of the Nigerian Energy Industry

Financial market update

Financial markets30 January 2014, Sweetcrude, Houston – Local and international financial market products and services update.
NIGERIA: President Goodluck Jonathan on Wednesday announced that Nigeria had mobilised $700 million to support the completion of the Nigeria-Algeria gas pipeline project. Jonathan made this known in Addis Ababa in a report on the status of the Trans-Saharan gas pipeline project which was presented at the 30th meeting of the NEPAD Heads of State and Government Orientation Committee. Represented by the Supervising Minister of Foreign Affairs, Prof. Viola Onwuliri, Jonathan renewed the special commitment of Nigeria to jump start the project, which has an estimated cost of 20 billion dollars.

BONDS: Driven by general EM sentiments, bond prices across the curve opened lower yesterday morning driving average yields higher, however by close of trading average yield closed flat. Mixed performance across the curve as yields declined on the 15s and 17s instruments with mild increase in other maturities.

BILLS: The sell-off was unrelenting in the market yesterday, inflicting more pain to the already sore wounds coming up from the 30 – 70 bps run up in yields across the curve this week. The impact of the past few weeks of aggressive demand has been effectively reversed with overall average yields now closer to the year’s open at 12.20%, all on the back of OMO offerings by the central bank. More OMO bills were offered to the market yesterday – however no sale was made.

MONEY MARKET: OBB and ON rates remained at 10.15% and 10.25% respectively as current liquidity in the system still high at above NGN1 trillion.

COMMODITIES: WTI rose, trimming the biggest monthly decline for January since 2010, as demand for distillate fuel countered a second weekly increase in U.S. crude stockpiles. WTI for March delivery was at $97.53 a barrel, up 17 cents, in electronic trading on the New York Mercantile Exchange.

FX: Volatile day for the pair yesterday with a range of 117 points traded. The pair opened at the 163 level but an expectation of a CBN intervention led to a selling down of USD after an initial up-tick. The bearish run had rates trading at a low of 161.98/08 before we saw a retracement towards the end of trading without any intervention from CBN. The pair closed at about same level as the previous day.

CBN RDAS AUCTION: CBN offered $400 million and sold $399.65 million at Wednesday’s RDAS auction. Marginal rate was 155.75 (1% commission excluded) and 22 banks participated.

US: The Federal Reserve on Wednesday decided to trim its bond purchases by another $10 billion as it stuck to a plan to wind down its extraordinary economic stimulus despite recent turmoil in emerging markets. The action was widely expected, although some investors had speculated that the U.S. central bank might put its plans on hold given the jitters overseas. Fed Chairman Ben Bernanke, who hands the Fed’s reins to Vice Chair Janet Yellen on Friday, managed to adjourn his last policy-setting meeting without any dissents from his colleagues. It was the first meeting without a dissent since June 2011 – a sign of how tumultuous Bernanke’s tenure has been.

EU: Proposals to isolate some of the riskier trading activities by the banking sector have been unveiled by the European Commission. Proprietary trading – using banks’ own funds for investing – would be banned, and measures introduced to ring-fence retail from investment divisions. European commissioner Michel Barnier said they were the “final cogs in the wheel” of banking reform. But critics said the draft legislation did not go far enough. The proposals still need approval from individual countries and the European Parliament, and are unlikely to begin before 2017.

Macro Economic Indicators
lation 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                          11.3750
60 Day                          11.7500
90 Day                          12.0417
USD 1 Month               0.1595
USD 2 Months             0.1987
USD 3 Months             0.2356
USD 6 Months             0.3335
USD 12 Months           0.5704

Benchmark Yields
Tenor                Maturity         Yield (%)
91 days                24-Apr-14          11.42
182 days             07-Aug-14          12.07
364 days             22-Jan-15           13.29
2 years                23-Apr-15           12.05
4 years                31-Aug-17           12.81
5 years                30-May-18         12.87

Indicative Currency Exchange Rates
                                Bid          Offer
EURUSD             1.3646        1.3696
GBPUSD              1.6554        1.6604
USDJPY               102.45       102.85
USDCHF              0.8963      0.8993
GBPEUR              1.2131         1.2141
USDZAR              11.2626      11.4126
USDNGN             162.32        162.62
JPYNGN               1.5844       1.6344
CHFNGN             181.10        185.10
EURNGN             221.50       225.50
GBPNGN              268.70      272.70
ZARNGN              14.41           16.41

                             Hi               Low           Close          Prev.Close
USD/NGN  163.15/25     161.98/08     162.82/92     162.80/90

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