A Review of the Nigerian Energy Industry

Financial market update

Financial markets27 March 2014, Sweetcrude, Lagos – Local and international financial market products and services update.
NIGERIA: Incoming Central Bank of Nigeria (CBN) governor, Godwin Emefiele yesterday took a strong stance in favour of the naira, as the Senate confirmed him. Emefiele has indicated that the CBN’s exchange rate policy was correct and that a devaluation of the NGN would be devastating for the import-dependent economy, a development analysts regard as a positive, as he will not depart from the CBN’s $/N stability stance. Promptly confirmed by the Senate yesterday, Emefiele is expected to bring sanity and calmness into the financial services industry, analysts said last night.

FIXED INCOME: Despite Tuesday’s announcement of further tightening by the MPC, bulls led the T-Bills and bonds market as investors took advantage of what seemed to be relatively attractive yields – the 52DTM (15-May) bill attracted the most interest, closing at 12.41% having seen its yield compress 57bps. At the Primary Market Auction, the CBN offered a total of NGN55.2billion on the 91DTM and 182DTM bills, with stop rates at 11.90% and 13.18% accordingly. With the market still in a surplus position, we expect current positive sentiments in the T-Bill market to persist barring any OMO sales by the Central Bank. Average bond yields closed tighter at 13.51% showing 31bps yield compression. Lots of activity was also witnessed on the new 2024s.

COMMODITIES: West Texas Intermediate crude gained as inventories at Cushing, Oklahoma, decreased for an eighth week and demand for gasoline reached a three-month high. WTI for May delivery gained $1.07 to settle at $100.26 a barrel on the New York Mercantile Exchange.

FX: Market had some calmness restored yesterday as the speculative demand witnessed on Tuesday subsided. The pair traded tightly, briefing crossing 165 intraday, but traded predominantly and closed below 165. Undisclosed inflow from an oil company partly helped in ensuring rates stability. The pair closed at about 20 points depreciation from previous level.

CBN RDAS AUCTION: CBN offered $400 million and sold $394.68 million at yesterday’s RDAS auction with 20 banks in participation. Marginal rate was maintained at 155.74 (1% commission excluded) from the previous auction.

US: A bubble could form in the U.S. economy even as the Federal Reserve unwinds its accommodative policy, a top U.S. central banker said on Thursday, adding policymakers’ ability to spot them had improved substantially. James Bullard, president of the Federal Reserve Bank of St. Louis, also told an investment conference in Hong Kong that while there was a risk of keeping rates too low for too long, he did not think the Fed was doing that.

EU: Pay awards in British factories held steady at their highest level since mid-2012 in the three months to February, according to an industry survey that added to evidence that wages are rising faster. Wage growth is both a key indicator for the Bank of England in deciding when to raise interest rates to control inflation and a major political issue, with the opposition Labour Party saying pay has lagged the true living costs of many people.

Macro Economic Indicators
Inflation rate (yoy) for Feb. 2014            7.7%
Monetary Policy Rate current                   12%
FX Reserves (Bn $) as at Mar. 25          37.881

Money Market Highlights

O/N                              10.7500
7 Day                            11.0000
30 Day                         11.3750
60 Day                         11.7083
90 Day                         11.9583
USD 1 Month              0.1530
USD 2 Months            0.1936
USD 3 Months            0.2334
USD 6 Months            0.3295
USD 12 Months          0.5621

Benchmark Yields
Tenor             Maturity           Yield

91d                    19-Jun-14            12.40
182d                  04-Sep-14           13.61
364d                 05-Mar-15           15.00
2y                      23-Apr-15            13.91
4y                      31-Aug-17            13.66
5y                     30-May-18           13.62

Indicative Currency Exchange Rates
Bid             Offer

EURUSD      1.3731         1.3833
GBPUSD      1.6521         1.6623
USDJPY       102.15         102.18
USDCHF      0.8802       0.8905
GBPEUR      1.1931          1.2033
USDZAR      10.6055      10.8105
USDNGN      164.45        165.15
JPYNGN      1.5707         1.7207
CHFNGN     187.26        192.86
EURNGN    227.56        232.76
GBPNGN    273.06        278.26
ZARNGN     14.32           18.12

Hi                Low           Close       Prev.Close
      165.13/23    164.75/85   164.80/90   164.60/70

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