A Review of the Nigerian Energy Industry

Financial market products and services update

Financial markets20 May 2014, Sweetcrude, Houston, Tx – Local and international financial market products and services update.
NIGERIA: Analysts expect a ‘not-too-different’ decision from what is currently obtainable across various rates ahead of the outcome of today’s Monetary Policy Committee (MPC) meeting, the last to be presided over by Sarah Alade as the acting governor of the Central Bank of Nigeria (CBN). The MPC meeting, which started yesterday, is the last before Godwin Emefiele, the new CBN governor-designate, takes the mantle of leadership at the Central bank on June 1, 2014.

FIXED INCOME: Activity yesterday was skewed towards the short dates. With a pump of liquidity from FG allocations, overnight rate reset back to its 10% lows and the whole t-bill curve gapped lower by 30-70bps as interbank players scrambled for yields. We may continue to see some compression in yields especially in the 9-12m space, barring any aggressive intervention by the Central bank through OMO auctions. Bonds traded sideways yesterday with overall average closing marginally higher. The MPC meeting commenced yesterday, with the press release expected at market close today. We should see a fairly quiet market today going into the release.

West Texas Intermediate traded near a four-week high amid speculation crude supplies will shrink further at Cushing, the biggest U.S. oil-storage hub, halting gains in nationwide stockpiles. WTI for June delivery was at $102.65 a barrel in electronic trading on the New York Mercantile Exchange, up 4 cents.

FX: It was a lacklustre trading for the USDNGN yesterday. We traded within the 162.25-162.50 for majority of the day, with flows well matched. We saw a brief USD sell-off mid-day to an intraday low 162.15/25 but the pair retraced almost immediately and a late surge in demand ensured we closed a tad higher than previous level at 162.50/60. We expect the pair to be capped at 162.70-163.00 this week with another round of oil flows expected as we head towards the month-end. Support is at 161.75-162.00. The MPC meeting is scheduled to hold on 19-20 May and expected to leave key policies unchanged and probably see a reiteration of commitment towards exchange rate stability.

CBN RDAS AUCTION: CBN offered $350 million and sold $345.97 million at yesterday’s RDAS auction. Marginal rate was maintained at 155.73 (1% commission excluded) from the previous auction. 21 banks participated.

US: The Federal Reserve’s super-easy policies, if pursued for too long, could have adverse consequences in the long run, two top Fed officials said on Monday, although the biggest risk is not runaway inflation. Instead, San Francisco Fed President John Williams told reporters after participating in a monetary policy conference at the George W. Bush Institute in Dallas, one major risk is that low rates for too long could push asset prices too high, or encourage investors to take on too much risk. The Fed is unwinding its massive bond-buying stimulus this year and is expected to start raising interest rates next year from the near-zero levels the central bank has maintained since December 2008. As the Fed normalizes monetary policy, Williams said, it needs to be wary of any distortions it may have already sown.

CHINA: China’s cabinet signaled on Tuesday it is closer to letting local governments directly sell bonds for the first time and said it would phase out opaque financing vehicles that are thought to have built up trillions of dollars of high-risk debt. In a sweeping statement, the country’s top economic planner, the National Development and Reform Commission (NDRC), said Beijing would deliver stable economic growth whilst pursuing reforms.

Macro economic Indicators
Inflation rate (yoy) for Apr. 2014       7.9%
Monetary Policy Rate current             12%
FX Reserves (Bn $) as at May. 16      37.500

Money Market Highlights
NBOR (%)

O/N                          10.5500
30 Day                     12.3094
90 Day                     13.0801
180 Day                   14.2583
USD 1 Month         0.1485
USD 2 Months       0.1912
USD 3 Months       0.2270
USD 6 Months       0.3229
USD 12 Months     0.5346

Benchmark Yields
Tenor         Maturity         Yield

91d                21-Aug-14          9.93
182d             04-Dec-14          10.49
364d            07-May-15          11.19
2y                 16-Aug-16           11.76
4y                 31-Aug-17           11.76
5y                 29-Jun-19           12.05

Indicative Currency Exchange Rates
Bid        Offer

EURUSD        1.3645      1.3747
GBPUSD         1.6783      1.6886
USDJPY          101.37      101.40
USDCHF         0.8883     0.8984
GBPEUR         1.1931      1.2033
USDZAR         10.3125   10.5185
USDNGN        162.20     162.90
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    162.60/70    162.15/25    162.50/60    162.28/38

In this article

Join the Conversation