A Review of the Nigerian Energy Industry

Financial market update

Financial-markets28 February 2014, Sweetcrude, Lagos – Local and international financial market products and services update.
NIGERIA: The Central Bank of Nigeria (CBN) Acting Governor, Dr. Sarah Alade, has said the bankers’ committee will not rescind on the plan to extend the cashless policy to other states in the country from July 1. She insisted that since most adults in Nigeria, in cities and in rural areas have mobile phones, cashless policy would be at the reach of everyone. Alade stated this while unveiling new security policies to protect bank customers and the business community against electronic fraud, adding that the new strategy would fortify the nation’s economic and financial policies.

BONDS: It was a relatively subdued session in the bond markets yesterday with average yields closing flat compared to the prior day.

BILLS: The CBN conducted its first successful OMO auction in over a week, selling approximately NGN44.3 billion on the 126DTM bill at a stop rate of 13.1% (vs. 12.20% offered at the last successful auction). The auction result which came out by midday caused a spike in secondary market yields (which had opened lower in the morning).The market closed on an aggressive note.

MONEY MARKET: OBB and ON rate closed higher at 10.50% and 10.75% respectively.

FX: Yesterday saw a slight depreciation in the Naira as we continued to see some stability with the pair. The USDNGN traded mostly at the 165 levels and within a tight range. Later on in the day, we saw a demand for dollars that pushed rates to the day’s high of 165.80/90. The CBN intervened again and helped dip rates to a low of 164.80/90 before a late rise in levels saw rates close at 165.05/15.
COMMODITIES: West Texas Intermediate crude fell for a second day, trimming a monthly gain. WTI for April delivery fell as much as 53 cents to $101.87 a barrel in electronic trading on the New York Mercantile Exchange

US: Unusually harsh winter weather appears to be behind recent signs of weakness in the U.S. economy, Federal Reserve Chair Janet Yellen said on Thursday, suggesting that the central bank was poised to press forward in ratcheting back its stimulus. Testifying to the Senate Banking Committee, Yellen said the Fed would watch carefully to ensure weather was indeed the culprit, but she reiterated that it would take a “significant change” to the economy’s prospects for the Fed to put plans to wind down its bond-buying program on hold.

EU: Lending to households and firms in the euro zone fell again in January and money supply growth remained subdued, adding to pressure on the European Central Bank to take action next week to support the economy. The ECB cut interest rates to a record low, pumped extra liquidity into the banking system and announced a fresh government bond purchase program. However, the measures so far, have not managed to unclog lending to the real economy. Euro zone inflation is also running at only 0.8 percent – far below the ECB’s target of just under 2 per cent.

Macro Economic Indicators
Inflation rate (yoy) for Jan. 2014      8%
Monetary Policy Rate current            12%
FX Reserves (Bn $) as at Feb. 26     40.406

Money Market Highlights

O/N                               11.5417
7 Day                             11.8333
30 Day                          12.0833
60 Day                          12.3333
90 Day                          12.5833
USD 1 Month               0.1545
USD 2 Months            0.1959
USD 3 Months            0.2361
USD 6 Months            0.3300
USD 12 Months          0.5523

Benchmark Yields
Tenor             Maturity         Yield (%)

91 days            29-May-14        12.84
182 days          04-Sep-14         12.76
364 days          19-Feb-15         14.14
2 years             23-Apr-15         13.94
4 years             31-Aug-17         13.27
5 years             30-May-18       13.27

Indicative Currency Exchange Rates
                            Bid           Offer
EURUSD       1.3696         1.3746
GBPUSD       1.6685         1.6735
USDJPY        101.75          102.15
USDCHF       0.8885       0.8915
GBPEUR       1.2182         1.2192
USDZAR       10.67           10.82
USDNGN      164.55         164.85
JPYNGN       1.6172          1.6672
CHFNGN      185.20        189.20
EURNGN      225.37        229.37
GBPNGN      274.55        278.55
ZARNGN       15.42          17.42

                                Hi                 Low            Close      Prev.Close
USD/NGN   165.80/90   164.80/90   165.05/15   164.65/75

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