A Review of the Nigerian Energy Industry

Financial market update

Financial markets08 May 2014, Sweetcrude, Houston, Texas – Local and international financial market products and services update
NIGERIA: Federal Government of Nigeria domestic debt at end-March has reached N7.18 trillion (USD44.9 billion), representing 8.9% of estimated 2013 GDP, the quarterly data released by the Debt Management Office (DMO) has revealed. Analysis of the DMO data revealed that the increase, in naira terms, was just NGN60 billion. However, the nation’s debt burden will rise to 10.7% of GDP if FGN’s external debts are taken into consideration.

FIXED INCOME: With market being starved of assets due to the fact that the CBN has deliberately stayed away from OMO issuances in the last 2 weeks, the appetite and the stop rates at the tbill auction were no surprise. What came across as the surprise was the move by the Central bank to sell only NGN82bn of the 1-year even though NGN105bn was on offer. The difference on this was moved to the 91- day bucket, where they sold NGN45.17bn against NGN22.057 on offer. The stop rates were at 10.51%, 11.25% and 12.71% yield on the 91-day, 182-day and 364-day respectively. We expect a strong tone today baring the announcement of an OMO auction.

COMMODITIES: West Texas Intermediate traded near the highest price in a week after crude inventories shrank for the first time since March in the U.S., the world’s biggest oil consumer. WTI for June delivery was at $100.79 a barrel in electronic trading on the New York Mercantile Exchange.

FX: It was a nervous market yesterday – market was trading with very thin liquidity for most of the day; we moved from a 161.70/80 open to a 160.30 low in a few minutes of trading and back up towards opening levels shortly again. Market traded a high of 162.00 and closed at 161.70/80 and there were no significant flows from local corporates or offshore clients; we suspect that interbank is only trading on the “post-oil flow” sentiments, closing out short positions and playing the range.

CBN RDAS AUCTION: It was another round of under-utilized Central bank RDAS auction yesterday, as approximately $289.9 million was sold out of the $400M on offer. Marginal rate was maintained at 155.73 (1% excluded) and 19 banks participated.

US: U.S. consumer credit recorded its largest increase in a year in March, boosted by growing demand for student loans and household borrowing to buy automobiles. Total consumer credit increased by $17.53 billion to $3.14 trillion, the Federal Reserve said on Wednesday. That was the largest rise since February 2013. February’s consumer credit figure was revised lower to show a $12.99 billion increase rather than the previously reported $16.49 billion advance.

EUROPE: The European Central Bank is expected to take heart from signs of life in the euro zone economy and keep interest rates on hold on Thursday, resisting pressure to act in the face of a stronger euro and persistently low inflation. Days before the Governing Council gathered in Brussels for its May policy meeting, France’s Prime Minister Manuel Valls and the Organization for Economic Cooperation and Development called for more stimulus as the euro marched towards a 2-1/2 year high. But while the ECB is expected to reiterate its concern about the impact the strong currency has on already-low inflation, it is not expected to act, at least not for now, as data points to a firmer recovery and improved financing conditions.

Macro Economic Indicators
Inflation rate (yoy) for Mar. 2014        7.8%
Monetary Policy Rate current               12%
FX Reserves (Bn $) as at May. 05        37.958

Money Market Highlights

O/N                                10.5917
30 Day                           12.4444
90 Day                           13.0338
180 Day                         14.0716
USD 1 Month                0.1515
USD 2 Months              0.1913
USD 3 Months              0.2240
USD 6 Months              0.3235
USD 12 Months            0.5436

Benchmark yields
Tenor            Maturity           Yield

91d                   31-Jul-14              10.16
182d                 09-Oct-14            10.71
364d                 23-Apr-15            12.24
2y                      16-Aug-16            12.32
4y                      31-Aug-17            12.26
5y                      29-Jun-19            12.40

Indicative Currency Exchange Rates
Bid      Offer

EURUSD      1.3875     1.3977
GBPUSD       1.6912     1.7015
USDJPY        101.775   101.805
USDCHF       0.8701    0.8803
GBPEUR       1.1931      1.2033
USDZAR       10.3497   10.5558
USDNGN      161.50      162.20
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
161.95/05  160.30/40  161.80/90    161.58/68

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