A Review of the Nigerian Energy Industry

Financial market products & services update

Financial markets 119 May 2014, Sweetcrude, Houston, Tx – Local and international financial market products and services update.
NIGERIA: There are indications that President Goodluck Jonathan may sign the 2014 appropriation bill into law this week. The Senate had on April 9 passed the bill, raising the amount in the fiscal document from the N4.642tn submitted by Jonathan to the National Assembly on December 19, 2013 to N4.695tn. Highlights of the budget as passed by the upper chamber are statutory transfers, N408.68bn; debt servicing, N712bn; recurrent expenditure, N2.454tn; and capital expenditure, N1.119tn.

FIXED INCOME: Liquidity in the market dropped significantly by about N250 billion to its lowest level in about 2 months (currently just over N280 billion), as we had a combination of the AMCON asset sinking fund contribution by banks, bond auction debit and NNPC outflow. On the back of this, overnight rates inched higher to 11% (+50bps). This is however expected to be short-lived as we expect huge inflows from FG allocations (N350billion) and bills maturity (N320 billion) next week; however, this did not feed through to the bill market which closed the day with yields marginally higher by an average of 4bps. We saw some selling in the long end, especially the 22s which closed the day higher by 8bps. Other tenors in the bond space were up about 2-5bps. The MPC meeting scheduled to hold on 19-20 May is expected to leave key policies unchanged and probably a reiteration of commitment towards exchange rate stability.

COMMODITIES: West Texas Intermediate rose in New York. WTI for June delivery rose as much as 43 cents, or 0.4 percent, to $102.45 a barrel in electronic trading on the New York Mercantile Exchange.

FX: The USDNGN gave way to pressure last week as we had pockets of USD demand creeping into the market. In spite of the oil inflows in the market, the pressure still persisted. The week was however characterised by mild volatility in the trading cycle as we had no clear-cut view of where market was eventually headed. The pair however found resistance at the 163.45 levels as there were some USD sales in the market. We believe that in flows were from chasing the Bond auction onshore. In the coming week, we should see a flurry of oil flows as we approach the month-end cycle. This should stem the depreciation run of the pair and see the support at the 161.45 levels.

US: Dallas Federal Reserve Bank President Richard Fisher made no reference to the economic outlook or monetary policy in remarks prepared for delivery to graduates of Bryant University in Smithfield, R.I. on Saturday. Fisher, who votes on Fed policy this year, is next expected to speak on policy on May 19 at a conference on monetary policy at the Bush Institute in Dallas, where he is to appear on a panel with San Francisco Fed President John Williams.

CHINA: China will try to quicken the pace of economic reform this year as part of the government’s efforts to arrest a slowdown in the world’s second-largest economy, the country’s top economic planning agency said late on Saturday. The National Development and Reform Commission (NDRC) reaffirmed nine reform priorities for 2014, including deepening reforms in the power and the oil and gas industries and cutting red tape for investment approvals.

Macro economic Indicators
Inflation rate (yoy) for Apr. 2014         7.9%
Monetary Policy Rate current               12%
FX Reserves (Bn $) as at May. 15         37.517

Money Market Highlights

O/N                            10.6917
30 Day                       12.1636
90 Day                       13.1018
180 Day                     14.2565
USD 1 Month           0.1493
USD 2 Months         0.1908
USD 3 Months         0.2286
USD 6 Months         0.3253
USD 12 Months       0.5346

Benchmark Yields
Tenor       Maturity      Yield

91d              14-Aug-14      9.81
182d           04-Dec-14      10.79
364d           07-May-15     11.57
2y                16-Aug-16      11.79
4y                31-Aug-17       11.71
5y                29-Jun-19       11.93

Indicative Currency Exchange Rates
Bid       Offer

EURUSD     1.3666     1.3768
GBPUSD      1.6769     1.6871
USDJPY       101.38     101.41
USDCHF      0.8862    0.8964
GBPEUR      1.1931      1.2033
USDZAR      10.2460   10.4520
USDNGN     161.98      162.68
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    162.70/80   161.95/05   162.28/38   162.35/45

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