A Review of the Nigerian Energy Industry

Financial market update

Financial markets02 March 2014, Sweetcrude, Lagos – Local and international financial market products and services update.
NIGERIA: The Debt Management Office (DMO) has concluded arrangements to raise between N200 billion ($1.21billion) and N280 billion ($1.70billion) from the sale of FGN bonds in Q2 2014, its provisional calendar has revealed. Analysis of the calendar for the quarter showed that the DMO plans to offer three-year paper (13.05% Aug ‘16s) and 10-year instruments (14.20% Mar ‘24s) in the quarter.

FIXED INCOME: Buying pressure seen across all bond maturity spectrums, save for the longest dated bond maturity, which traded flat. The average bond yield fell by 6bps to 13.80% from 13.86%. Bullish run persisted in the T-bills market leading to a 9bps decline in average yield to 13.27%. The two earliest maturities experienced the greatest sell pressure with an average yield increase of 25bps on those maturities. The spread between average yields on bond and bills are now at 53bps. Another successful OMO auction yesterday on the 114DTM (24th July 2014), total sales was NGN39.53billion at a stop rate of 13.05%. O/N and OBB rate closed at 10.50% and 10.25% respectively as liquidity opened at about NGN467billion yesterday morning.

COMMODITIES: West Texas Intermediate crude fell the most since March 12 on speculation that U.S. inventories gained for an 11th week and as a gauge of manufacturing rose less than expected. WTI for May delivery declined $1.84, or 1.8 percent, to settle at $99.74 a barrel on the New York Mercantile Exchange.

FX: More sales by two oil companies yesterday helped provide further support for the pair. The local unit gained about 30 points as market had a decent boost in USD liquidity. The pair remains tightly traded, within a 37 points band yesterday, predominantly below 165. Market closed at 164.60/70 – NGN’s strongest level in a week.

US: U.S. job growth likely accelerated in March as the winter’s gloom started to lift, providing the strongest signal yet that economic growth was shifting into higher gear. Nonfarm payrolls probably increased by 200,000, the largest gain in four months, according to reports. Hiring advanced by 175,000 jobs in February. The unemployment rate is expected to have dropped one-tenth of a percentage point to 6.6 percent. The anticipated gain in employment would take job growth back near the 204,000 monthly average that prevailed through the first 11 months of 2013.

EUROPE: The economic crisis in Europe has put 6 million people out of work and driven others into poverty, according to a think-tank study looking into the social impact of the slump that was examined by EU finance ministers for the first time on Tuesday. As host, Greece, the first euro zone state to be bailed out during the crisis, put the study on the agenda of a regular meeting of EU finance ministers that has usually focused on appeasing financial markets with tough spending reforms.

Macro Economic Indicators
Inflation rate (yoy) for Feb. 2014        7.7%
Monetary Policy Rate current               12%
FX Reserves (Bn $) as at Mar. 28    37.803

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                 0.1510
USD 2 Months               0.1908
USD 3 Months               0.2281
USD 6 Months               0.3279
USD 12 Months             0.5536

Benchmark Yields
Tenor            Maturity           Yield

91d                   03-Jul-14              12.95
182d                04-Dec-14             13.63
364d                05-Mar-15             14.28
2y                     23-Apr-15              13.73
4y                     31-Aug-17              13.20
5y                    30-May-18             13.20

Indicative Currency exchange Rates
                          Bid          Offer
EURUSD        1.3764        1.3865
GBPUSD         1.6582       1.6684
USDJPY          103.273     103.805
USDCHF         0.8772       0.8875
GBPEUR          1.1931        1.2033
USDZAR         10.4852     10.6913
USDNGN         164.30       165.00
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
164.95/05      164.58/68   164.60/70   164.88/98

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