A Review of the Nigerian Energy Industry

Financial market update

Financial markets13 March 2014, Sweetcrude, Lagos – Local and international financial markets products and services update.
NIGERIA: The Nigerian Labour Congress (NLC) yesterday warned that the Nigerian economy would soon grind to a halt if the ongoing scarcity of petrol was not immediately addressed. NLC said in a statement that was signed by its President in Abuja, Abdulwahed Omar, that the ongoing scarcity had greatly slowed down economic activities in the country. Omar also alleged in the statement that the government was deliberately punishing Nigerians with the fuel scarcity, thus asked the federal government to stop punishing Nigerians with the scarcity.

FIXED INCOME: Bearish session in the bills market with more focus on the March and April bills which saw the greatest yield increase by an average of 26bps. Average yield closed at 13.73% from 13.68% on Tuesday. Bonds market continues to be extremely quiet and yesterday being a bond auction did not help matters. Yields increased on all maturities except for the April 15s which declined by 13bps. Average yields closed at 13.95% from 13.92% on Tuesday. In line with our expectation, we saw limited offshore participation but huge PFA interest in the new 10yr paper due to their strong appetite for duration. Both papers were oversubscribed with allocation at NGN35B and NGN50B. Stop rate at 14.10% and 14.20% on the 2016s and 2024s respectively. The 2024s paper was issued at par and it will be interesting to see how these trades perform in the secondary market next week Monday. OBB and O/N rate closed higher by 50bps to 14.75% and 15.00% respectively as liquidity thins out to open at about NGN170b yesterday.

COMMODITIES: West Texas Intermediate traded near the lowest price in more than a month before data forecast to show reduced growth in factory output in China, the world’s second-largest oil consumer. WTI for April delivery was at $98.32 a barrel in electronic trading on the New York Mercantile Exchange, up 33 cents.

FX: Very mild volatility yesterday, with inflows from two oil companies enough to stabilise rates within a 33 points range. Market traded an intraday high of 164.93/03 from an initial increase in levels after opening at 164.75/85, but the sales by the oil companies helped retraced rates below the opening level and the pair traded tightly thereafter. Market closed with about 10 points appreciation for the local unit.

CBN RDAS AUCTION: CBN offered $400 million and sold $397.70 million at yesterday’s RDAS auction with 20 banks in participation. There was a one point appreciation in the marginal rate to 155.74 (1% commission excluded) from 155.75, which had been maintained for the previous 14 auctions.

US: Stanley Fischer, U.S. President Barack Obama’s pick for the No. 2 spot at the Federal Reserve, dove in Wednesday to one of the most important debates at the U.S. central bank, as he called for making financial stability an “explicit” policy focus. The Fed is mandated by Congress to pursue just two goals, maximum employment and price stability, but since the 2007-2009 recession has increasingly taken on responsibility for battling cracks in the financial system.

CHINA: Any default of loans in China will not set off systemic risks in the world’s second-largest economy, Premier Li Keqiang said at a press conference on Thursday. Li reiterated the government’s standard line that debt risks in China are under control.

Macro Economic Indicators
Inflation rate (yoy) for Jan. 2014       8%
Monetary Policy Rate current             12%
FX Reserves (Bn $) as at Mar.11     38.908

Daily Market Commentary March 13, 2014

O/N                              15.4167
7 Day                            15.6667
30 Day                         15.9167
60 Day                         16.1250
90 Day                         16.3333
USD 1 Month              0.1555
USD 2 Months           0.1993
USD 3 Months           0.2341
USD 6 Months           0.3305
USD 12 Months         0.5552

Benchmark Yields
Tenor               Maturity          Yield

91d                      05-Jun-14           12.85
182d                    04-Sep-14           13.77
364d                   05-Mar-15           14.86
2y                        23-Apr-15            13.68
4y                        31-Aug-17            13.44
5y                        30-May-18           13.45

Indicative Currency Exchange Rates
                             Bid           Offer
EURUSD           1.3934         1.3984
GBPUSD            1.666           1.671
USDJPY             102.6           103
USDCHF            0.8726        0.8756
GBPEUR            1.1956         1.1966
USDZAR            10.7805      10.9305
USDNGN           164.65         164.95
JPYNGN             1.6048        1.6548
CHFNGN            188.69        192.69
EURNGN           229.42         233.42
GBPNGN            274.31         278.31
ZARNGN            15.27           17.27

                            Hi                  Low          Close        Prev.Close
USD/NGN  164.93/03     164.60/70    164.70/80    164.82/92

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