A Review of the Nigerian Energy Industry

Financial market update

Financial-markets11 March 2014, Sweetcrude, Lagos – Local and international financial market products and services update.
NIGERIA: In a more strategic move to ensure universal health coverage for all Nigerians, the federal government is mulling plans to ensure that GSM phone users are taxed, including air passengers and goods and services harmful to the health of Nigerians. This was made known yesterday at the Presidential Summit on Universal Health Coverage (UHC) at the Presidential Villa, Abuja. President Goodluck Jonathan, represented by the Vice-President, Alhaji Namadi Sambo, harped on the need to diversify the means of funding health insurance in the country.

FIXED INCOME: Fairly quiet start to the week as the tbill market recorded its first quiet session after a bearish run in the last two weeks. Average yield recorded a marginal 1bps change and closed at 13.61%. NGN30 billion was on offer at OMO auction yesterday on the 122-day bill. The Stop rate remained unchanged at 13.10%. All eyes are on the bond auction on Wednesday. With the New 10-year paper coming to the market, we expect the stop rate to be in the 14.40-14.60% range (yield) and the 2016s (re issue) at 14.15-14.55%. OBB and O/N rate closed at 13.75% and 14% respectively.

COMMODITIES: West Texas Intermediate traded near the lowest price in more than three weeks amid speculation that crude stockpiles expanded in the U.S., the world’s biggest oil consumer. WTI for April delivery was at $101.23 a barrel in electronic trading on the New York Mercantile Exchange, up 11 cents, at 2:30 p.m. Singapore time. The contract dropped $1.46 to $101.12 yesterday, the lowest close since Feb. 14.

FX: Naira firmed yesterday as market witnessed significant Left Hand Side flows. The pair opened at 164.90/00 and majorly traded at the 165 level as expected; hitting the day’s high of 165.20/30, before a significant supply of USD into the market ensured the pair closed on a bearish note. Market closed with over 50 points appreciation for NGN from the previous level.

CBN AUCTION: CBN offered $400 mio and sold $399.99 mio at yesterday’s RDAS auction with 20 banks in participation. Marginal rate was maintained at 155.75(1% commission excluded) from the previous auction.

US: The White House on Monday forecast more robust economic growth in 2014 than last year and a further pickup in the economy for 2015. Under a White House projection, the U.S. economy is expected to expand by 3.1 percent this year, faster than last year’s 1.7 percent. Growth would pick up to 3.4 percent in 2015, the White House said. The administration also forecast that unemployment would ease to an average of 6.9 percent in 2014. The jobless rate, which reached a high of 10 percent in 2009, fell to a five-year low of 6.6 percent in January.

CHINA: China is likely to liberalize deposit rates in one to two years, central bank Governor Zhou Xiaochuan said on Tuesday at a media conference at China’s annual parliament session. Market talk has been rife that the central bank is quietly loosening policy to support economic growth as short-term money rates and the Yuan weakened on Monday after surprisingly weak exports data at the weekend.

Macro Economic Indicators
Inflation rate (yoy) for Jan.2014        8%
Monetary Policy Rate current            12%
FX Reserves (Bn.$) as at Mar.7       39.294

Money Market Highlights
O/N                      13.4583
7 Day                    13.5833
30 Day                 13.9583
60 Day                 14.1667
90 Day                 14.4167
USD 1 Month        0.1550
USD 2 Months     0.1993
USD 3 Months      0.2344
USD 6 Months      0.3320
USD 12 Months    0.5552

Benchmark Yields
Tenor         Maturity         Yields
91d               05-Jun-14        12.86
182d            04-Sep-14        13.61
364d           19-Feb-15          14.81
2y                23-Apr-15         13.85
4y                31-Aug-17         13.55
5y                30-May-18       13.52

Indicative Currency Exchange Rates
                        Bid        Offer
USD              1.3864     1.3914
GBPUSD     1.6636      1.6686
USDJPY      103.3        103.7
USDCHF     0.879       0.882
GBPEUR     1.1999      1.2009
USDZAR     10.728     10.878
USDNGN    164.20     164.50
JPYNGN     1.5895     1.6395
CHFNGN    186.80    190.80
EURNGN    227.65    231.65
GBPNGN    273.16     277.16
ZARNGN    15.31        17.31

                                 Hi                 Low           Close      Prev.Close
USD/NGN   165.20/30    164.15/25   164.25/35   164.78/88

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