A Review of the Nigerian Energy Industry

Financial market update

Financial-market21 February 2014, Sweetcrude, Lagos – Local and international financial market products and services update.
NIGERIA: President Goodluck Jonathan has suspended central bank Governor Lamido Sanusi in a surprise move that halted bond trading and sent the naira to a record low. Sanusi, 52, was suspended for alleged financial recklessness and misconduct, Jonathan’s spokesman Reuben Abati said in an e-mailed statement. He will be replaced by his deputy, Sarah Alade, as acting governor. Zenith Bank Plc Chief Executive Officer Godwin Emefiele has been nominated by Jonathan to succeed Sanusi when his term ends in June, according to a letter the president sent to the Senate.

BONDS: The interbank markets did not open over the headlines of the suspension of the CBN Governor. Bond yields rose by about 50-60bps. 96% of requests received wanted bids with requests coming majorly from offshore investors at NY open. The Nigeria Eurobond wasn’t spared with yields touching a 5-month high to close at 6.29% on the 23s.

BILLS: The bills market also did not open yesterday. Yields rose by about 150-200bps across board. We expect markets will try to recover today though being a Friday won’t help matters as market players will want to watch out for what happens over the weekend.

MONEY MARKET: OBB and ON rate closed lower at 10.50% and 10.75% respectively compared to 11.25% and 11.50% at Wednesday’s close.

FX: The USDNGN traded erratically yesterday as news of the suspension of CBN governor induced panic in the market; trading was suspended for over 2 hours. The Naira depreciated to a new record high of 169.15/25 after opening at 164.05/15 before the market froze. Calmness was restored with a late intervention by CBN which helped dip rates by about 600bps. The pair closed at 163.00/10. Expectation is for rates to retrace today with the departure of the influential outgoing CBN governor expected to ignite an initial NGN sell-off.

COMMODITIES: West Texas Intermediate crude headed for a sixth weekly gain as cold weather in the U.S. bolstered demand for heating fuels in the world’s biggest oil consumer. WTI for April delivery was at $102.76 a barrel in electronic trading on the New York Mercantile Exchange, up by 1 cent.

US: The U.S. economy is recovering but economic growth across the world remains uneven, unemployment remains high, and more co-ordinated efforts are needed to encourage global growth and job creation in 2014, U.S. Treasury Secretary Jack Lew has said. Speaking as he addressed a Group of 20 gathering in Sydney, Mr. Lew said the U.S. was focused on continuing the G20’s efforts on international financial reform, as well as trying to complete the stalled Trans-Pacific Partnership that would link a multitude of Pacific-facing countries – including Canada – in a trade pact.

Japanese Finance Minister Taro Aso has urged the United States to keep explaining to financial markets how it plans to wind back its massive monetary stimulus, noting the tapering is a good thing as it reflects an improving economy. Ahead of his departure for the Group of 20 finance ministers’ meeting in Sydney this weekend, Aso called on emerging market economies to implement necessary reforms to guard against any spillover from the U.S. tapering.

Macro Economic Indicators
Inflation rate (yoy) for Jan. 2014              8%
Monetary Policy Rate current                   12%
FX Reserves (Bn $) as at Feb. 19           41.302

Money Market Highlights

O/N                                  11.6667
7 Day                                11.9167
30 Day                             12.2083
60 Day                             12.4583
90 Day                             12.7083
USD 1 Month                   0.1555
USD 2 Months                 0.1970
USD 3 Months                 0.2356
USD 6 Months                 0.3295
USD 12 Months               0.5538

Benchmark Yields
Tenor             Maturity          Yield (%)

91 days             15-May-14            12.85
182 days           07-Aug-14            12.99
364 days           05-Feb-15            13.71
2 years              23-Apr-15             13.12
4 years              31-Aug-17             13.16
5 years              30-May-18           13.22

Indicative Currency Exchange Rater
Bid             Offer

EURUSD           1.3716          1.3766
GBPUSD            1.6644         1.6694
USDJPY             102.46         102.86
USDCHF           0.8889         0.8919
GBPEUR            1.2135          1.2145
USDZAR             11.03            11.18
USDNGN          162.50           162.80
JPYNGN           1.5860          1.6360
CHFNGN          182.81          186.81
EURNGN         222.89          226.89
GBPNGN         270.47          274.47
ZARNGN          14.73             16.73

                             Hi              Low           Close       Prev.Close
USD/NGN   169.15/25   162.60/70   163.00/10   163.92/02

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