A Review of the Nigerian Energy Industry

Financial market update

Financial markets06 May 2014, Sweetcrude, Houston – Local and international financial market products and services update.
NIGERIA: Nigeria’s finance Minister and Coordinating minister for the Economy, Ngozi Okonjo-Iweala said on Monday that insecurity in the country, especially in the North-East, would have no significant impact on this year’s growth projections for the economy, as against last year. Speaking at the pre-event media conference for the World Economic Forum on Africa (WEF), which officially begins in Abuja on Wednesday, Okonjo-Iwealla said investment interests in the country have rather heightened by strong macro-economic fundamentals. Nigeria has projected a 6.75 % in GDP growth this year, while the International Monetary Fund (IMF) projects even higher growth of around 7.2 % for the country.

FIXED INCOME: Bearish sentiment witnessed in the fixed income markets yesterday as focus has been directed to the primary market auction coming up on Wednesday. Stop rates will take a cue from current secondary market levels. The absence of an intervention by the Central bank with an OMO auction in recent weeks will support this auction as liquidity in the system remains in excess of NGN650bn. We are likely to see offshore interest in the 1-year space.

COMMODITIES: West Texas Intermediate slipped for a second day amid speculation crude inventories at a record high expanded further in the U.S., the world’s biggest oil consumer. WTI for June delivery was at $99.39 a barrel, down 9 cents, in electronic trading on the New York Mercantile Exchange.

FX: Another round of oil sales – over $85 million – ensured NGN further firmed yesterday with market well offered from opening at 159.60/70 to trade the strongest level for the pair since January 2014, hitting an intraday low of 158.45. The steep appreciation seen – over 1 big figure – further highlighted the decline in USD demand, given the dearth of paying interest at the relatively attractive level the pair is currently trading. Given the anticipated sales from the state owned oil company, the pair should be capped at 159.40-159.70 with support at 157.75-158.00 this week.

CBN RDAS AUCTION: CBN offered $400 million and sold $345.88 million at yesterday’s RDAS auction, further reflecting the dip in USD demand in the market recently. Only one in the last 10 RDAS auctions has had sales totalling the $400 million amount on offer by the apex bank. Marginal rate was maintained at 155.73 (1% commission excluded) and 19 banks participated.

US: Growth in the U.S. services sector accelerated in April, rising at the fastest pace in eight months as new orders jumped and overall activity quickened by the most since early 2008, an industry report showed on Monday. The Institute for Supply Management said its services sector index rose to 55.2 in April from 53.1 in March, topping expectations for a read of 54.1. The data provides further evidence that economic activity is regaining momentum after lagging through much of the winter, a lull largely blamed on harsh weather.

CHINA: Growth in China’s factory output and investment likely stabilized in April as the government uses targeted policy measures to underpin growth, while the pace of declines in exports and imports may have eased, a survey showed. However, the world’s second-largest economy may only get a temporary boost from such policy support, as growth will inevitably slow while the government seeks to tackle high debt levels and excessive factory capacity. China’s industrial output may have grown 8.9 percent in April from a year earlier, slightly ahead of the 8.8 percent rise in March, according to the survey.

Macro Economic Indicators
Inflation rate (yoy) for Mar. 2014       7.8%
Monetary Policy Rate current              12%
FX Reserves (Bn $) as at May. 02    38.122

Money Market Highlights

O/N                                10.5917
30 Day                           12.6645
90 Day                           13.3109
180 Day                         14.3360
USD 1 Month               0.1515
USD 2 Months             0.1898
USD 3 Months             0.2229
USD 6 Months             0.3225
USD 12 Months           0.5470

Benchmark Yields
Tenor            Maturity          Yield
91d                   31-Jul-14            10.28
182d                09-Oct-14           10.84
364d                23-Apr-15          12.20
2y                     16-Aug-16          12.45
4y                     31-Aug-17          12.46
5y                     29-Jun-19         12.56

Indicative Currency Exchange Rates
                        Bid       Offer
EURUSD     1.3870       1.3973
GBPUSD     1.6887        1.6991
USDJPY      101.985     102.015
USDCHF     0.8697      0.8799
GBPEUR      1.1931       1.2033
USDZAR      10.4047   10.6108
USDNGN     158.35      159.05
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
USD/NGN    159.60/70   158.45/55  158.65/75   159.78/88

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