A Review of the Nigerian Energy Industry

Financial market products and services update

Financial markets 113 May 2014, Sweetcrude, Houston, Texas – Local and international financial market products and services update.
NIGERIA: The acting Governor of the Central Bank of Nigeria (CBN), Dr. Sarah Alade has expressed concerns over the increasing role of banks in aiding money laundering worldwide. She regretted that bank facilities are used knowingly and unknowingly to further the act of money laundering and in most cases to retain the proceeds of such crime. Speaking yesterday in Abuja at the opening of a seminar on combating money laundering and other financial crimes, which was organised by the West African Institute for Financial and Economic Management (WAIFEM), she added that over 80 per cent of the proceeds of money laundering are associated with banks, one way or the other, all over the world.

FIXED INCOME: The market continued to enjoy strong bullish sentiments in both short and long end rates; boosted by the amount of liquidity in the system at approximately N500billion. This move was exaggerated in the long end as we witnessed a massive rally across the bond curve mid day; seeing a 30-60bps move, before profit takers came in, correcting the rally. We closed the 3Y and 10Y bonds 10bps lower while the 5Y bond closed 35bps lower. In the short end, t-bill yields in the 9 – 12m space dropped about 20bps while the rest of the short end was 10bps lower. We expect a slowdown in momentum going into the upcoming MPC meeting scheduled to hold on 19th-20th May. Although key policies are expected to remain unchanged; other statements may dictate the path of the Central bank in terms of FX stability and MPR guidance. The DMO would be offering 35bn each of the 2016 and 2024 bonds on Wednesday, expected to be fully subscribed by locals.

COMMODITIES: West Texas Intermediate traded near a three-day high amid speculation that crude stockpiles declined a second week in the U.S., the world’s biggest oil consumer. WTI for June delivery was at $100.73 a barrel, up 14 cents, in electronic trading on the New York Mercantile Exchange.

FX: Trading was within a 35 points range, NGN opened the week slightly bullish on the dollar, i.e. there was a demand for dollar. We opened at 161.25/35 to a rush of USD purchases pushing rates to 161.50/60 before we saw a retracement to opening levels where the pair settled and predominantly traded within the 161.35-161.50 band. Late upsurge in demand however pushed the rates beyond this band with NGN closing at the day’s high of 161.55/65. Given the surge in demand as we approach the mid-month being the trough of USD sales from the oil companies, NGN is expected to further weaken over the coming days.

CBN RDAS AUCTION: CBN sold $355.44 million of the $400 million on offer at yesterday’s RDAS auction; about $65 million increase from the last auction mirroring the surge in demand at the interbank market, though the CBN’s offering remained under-utilised. Marginal rate was maintained at 155.73 (1% commission excluded) and 20 banks participated at yesterday’s auction.

US: The United States posted a $107 billion budget surplus in April, according to Treasury Department figures released on Monday, suggesting the federal government was on track to slash its annual deficit. Washington usually runs a surplus in April because households have a deadline for settling tax bills that month. Last month’s surplus was slightly smaller than the $114 billion figure expected. Tax receipts have surged this year as the economy has improved. The Congressional Budget Office expects the deficit will shrink to $492 billion during the fiscal year, which began in October. In 2013, the government ran a $680 billion deficit.

CHINA: China’s industrial output rose 8.7 percent in April year-on-year and retail sales rose 11.9 percent, while fixed-asset investment rose 17.3 percent in the first four months from the same period last year, the National Bureau of Statistics said on Tuesday. A survey had forecast industrial output to rise 8.9 percent and retail sales to rise 12.2 percent. Fixed-asset investment for the January-April period was seen up 17.7 percent.

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                            10.6333
30 Day                       12.2526
90 Day                       13.0076
180 Day                     14.0066
USD 1 Month              0.1511
USD 2 Months           0.1923
USD 3 Months           0.2251
USD 6 Months           0.3224
USD 12 Months         0.5377

Benchmark Yields
Tenor         Maturity        Yield

91d               14-Aug-14         9.87
182d            09-Oct-14         10.42
364d           07-May-15         11.40
2y                16-Aug-16          11.88
4y                31-Aug-17          11.60
5y                29-Jun-19          11.86

Indicative Currency Exchange Rates
Bid        Offer

EURUSD       1.3711     1.3814
GBPUSD       1.6821    1.6924
USDJPY        102.32    102.35
USDCHF      0.8823    0.8925
GBPEUR      1.1931      1.2033
USDZAR      10.2552   10.4613
USDNGN     161.25     161.95
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   161.55/65   161.20/30   161.55/65   161.15/25

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