A Review of the Nigerian Energy Industry

Financial market update

Financial markets14 March 2014, Sweetcrude, Lagos – Local and international financial market products and services update.
NIGERIA: The 36 states of the Federation on Thursday, pushed for a review of the current fuel subsidy programme. They anchored their call for a review of the scheme because of their dissatisfaction with the rather limited results from the current fuel subsidy programme of the Federal Government that has gulped huge sums from the Federation Account. The Federation Account Allocation Committee (FAAC) yesterday, announced the creation of a 12-man committee to appraise the impact of the programme on the common man.

FIXED INCOME: In the Bond market, we saw some mild selloff on short dated bonds while we saw some buying interest on the longer dated bonds. The 22s saw the greatest buy pressure having declined by 8bps while the 2016s saw the greatest sell pressure, with yields increasing by 10bps. Overall Bonds closed flat as the auction result on Wednesday failed to incite the secondary market. On the bills, sell pressure across most maturities pushed yields higher by 12bps on average. The long term bills experienced the heaviest sell-offs. The spread between the average bond yield and bills are now very tight at 10bps from 60bps at the start of the month. The OMO auction yesterday was oversubscribed at NGN55B, but NGN45B was sold at a stop rate of 13.10%. Following the slight improvement in system liquidity, OBB and O/N rates have declined having touched year highs on Wednesday.

COMMODITIES: West Texas Intermediate crude rebounded from its lowest closing level in more than a month, narrowing its discount to Brent, amid speculation that earlier losses were excessive. WTI for April delivery gained as much as 61 cents to $98.60 a barrel and was at $98.24 as of 11:59 a.m. London time in electronic trading on the New York Mercantile Exchange.

FX: Gains for the local unit yesterday, as improved offshore interest in Wednesday’s bond auction ensured market had enough supply of USD liquidity to support the pair. Market traded at a 70 points range and closed around the 165 levels yet again. The pair had a slight pick-up when market opened, trading a high of 165.15/25 after opening at 164.80/90. Rates later retraced to the 164 range and closed at around the same levels of the previous day.

US: U.S. retail sales rebounded in February and new filings for jobless benefits hit a fresh three-month low last week, suggesting the economy was regaining strength after an abrupt slowdown caused by severe weather. The data on Thursday reinforced expectations of a pick-up in economic activity and should encourage the Federal Reserve to continue scaling back its massive monetary stimulus.

INDIA: The Indian economy can grow an annual 5.2 percent in the quarter to end-March on higher farm output growth, the chairman of the Prime Minister’s Economic Advisory Council said on Friday.

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 14, 2014

O/N                              13.9583
7 Day                            14.2500
30 Day                         14.6250
60 Day                         14.9167
90 Day                         15.2917
USD 1 Month            0.1550
USD 2 Months          0.1986
USD 3 Months          0.2334
USD 6 Months          0.3318
USD 12 Months        0.5570

Benchmark Yields
Tenor              Maturity           Yield
91d                     05-Jun-14            12.90
182d                  04-Sep-14            13.82
364d                 05-Mar-15            14.99
2y                      23-Apr-15             13.81
4y                      31-Aug-17             13.48
5y                      30-May-18            13.47

Indicative Currency Exchange Rates
                          Bid           Offer
EURUSD         1.3857        1.3907
GBPUSD          1.6621       1.6671
USDJPY           101.59       101.99
USDCHF          0.8755      0.8785
GBPEUR          1.1995       1.2005
USDZAR          10.8175    10.9675
USDNGN        164.65      164.95
JPYNGN         1.6207       1.6707
CHFNGN        188.06      192.06
EURNGN        228.16      232.16
GBPNGN         273.66     277.66
ZARNGN         15.22        17.22

                              Hi             Low            Close     Prev.Close
USD/NGN   165.15/25   164.45/55   164.60/70   164.70/80

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