A Review of the Nigerian Energy Industry

Financial market products & services update

Financial markets22 May 2014, Sweetcrude, Houston, Tx – Local and international financial market products and services update.
NIGERIA: The Federal Government has inaugurated an eleven member committee drawn from key stakeholders in Power, Presidency and Petroleum Resources in a bid to ensure accelerated and improved power generation. The Minister of Power, Professor Chinedu Nebo recalled the unalloyed political will demonstrated by Mr. President to drive the fast cruising Power Sector Reform to a logical end.

FIXED INCOME: A Shift in market activity to bonds space today, as decent local and offshore interest was seen in the 3y and 5y bonds rallying by 20bps to close at 11.60% and 11.95% respectively. The sentiment spilled over to the 10y space which closed 10bps lower, although seeing fewer volumes. Fairly quiet session in the short end (t-bills), with some slight selling across the curve especially around the 3m – 6m space, as the market begins to anticipate the Central bank’s OMO auctions, where better yields can be locked in.

The central bank held its biweekly primary t-bill auctions today selling N121.3 billion of the 91d, 182d and 364d at cut-off discount rates of 10%, 10.015% and 10.125%. The bid-to-cover ratio for the auction was at 4.30 with the weight of subscription on the 364d bill. With the exception of the 91d bill, the auction result was on the lower side of expectation. As such we may see some further compression in yields as the secondary market moves to track the auction results.

COMMODITIES: WTI for July delivery was at $103.86 a barrel in electronic trading on the New York Mercantile Exchange, down 21 cents, at 3:55 p.m. Seoul time.

FX: Gains for NGN on Wednesday as we saw a late boost in USD liquidity. We opened at 163.15/25 relatively calm, with slight appetite for the greenback seen amidst tight liquidity. Though we opened slightly bid, the pair fell short of the 163.60 resistance level and was capped at 163.45, while market settled in the 163.20-50 range for most part of the day. We however saw a spike in activities towards close with a boost in USD liquidity from few offshore yield hunters funding winnings at yesterday’s T-bills auction as well as some LHS flows from corporates ensured rates turned south, hitting an intraday low and close of 162.30/40. The price action from the late LHS flows is expected to continue as we should see a flurry of oil flows towards month-end, fixing our next support level around 161.50-60 and resistance at 162.50-80

CBN increased the amount on offer at the RDAS yesterday to $400 mio and sold $384.76 mio. Marginal rate was maintained at 157.2873 (1% commission inclusive)

EUROPE: Services industries in the euro area helped to keep momentum in the economy this month as a surge in growth offset a slowdown at manufacturers. Markit Economics said its composite Purchasing Managers’ Index was at 53.9, little changed from the reading of 54 in May and in line with the median estimate of economists. While a factory gauge slipped more than anticipated, a measure of services rose to a 35-month high. Markit said economic growth may accelerate to 0.5 percent this quarter, the fastest since early 2011.

CHINA: A Chinese manufacturing gauge rose to a five-month high in May, sending Asian stocks higher on speculation the economy is stabilizing after government moves to counter a slowdown. A preliminary purchasing managers’ index from HSBC Holdings Plc and Markit Economics was at 49.7, exceeding the 48.3 median estimate of analysts surveyed by Bloomberg News and a final reading of 48.1 in April. The number remained below the expansion-contraction line of 50.

Macro economic Indicators
Inflation rate (yoy) for Apr. 2014        7.9%
Monetary Policy Rate current              12%
FX Reserves (Bn $) as at May. 20      37.433

Money Market Highlights

O/N                         10.5417
30 Day                    12.5598
90 Day                    13.4664
180 Day                  14.3908
USD 1 Month         0.1485
USD 2 Months       0.1935
USD 3 Months       0.2274
USD 6 Months       0.3234
USD 12 Months     0.5336

Banchmark Yields
Tenor        Maturity       Yield

91d               21-Aug-14       9.31
182d            04-Dec-14      10.74
364d           07-May-15      11.49
2y                 16-Aug-16      11.65
4y                 31-Aug-17       11.63
5y                 29-Jun-19      12.05

Indicative Currency Exchange Rates
Bid         Offer

EURUSD        1.3673        1.3683
GBPUSD         1.6905       1.6915
USDJPY          101.58       101.98
USDCHF        0.8933       0.8953
GBPEUR        1.2362       1.2372
USDZAR        10.3727     10.4727
USDNGN       161.68       162.43
JPYNGN        1.5917        1.6417
CHFNGN       180.99       184.99
EURNGN       221.07      225.07
GBPNGN       273.32       277.32
ZARNGN       15.59         17.59

                             Hi              Low          Close        Prev.Close
USD/NGN  163.40/50   162.30/40   162.30/40   163.05/15

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