A Review of the Nigerian Energy Industry

Financial market products & services update

Financial markets23 May 2014, Sweetcrude, Houston, Tx – Local and international financial market products and services update.
NIGERIA: The United States Secretary of Commerce, Ms. Penny Pritzker, has said that Nigeria now tops the list of the investment destination for American investors due to its unique positioning on the African continent. Speaking at a bilateral meeting with the Minister of Industry, Trade and Investment, Olusegun Aganga, in Lagos yesterday, the US envoy said Nigeria currently had enormous investment opportunities which American investors were willing to explore.

FIXED INCOME: Busy session in the secondary market yesterday, seeing yields align to previous day’s auction result, where cut-offs (10.26%, 10.54% and 11.26% yield on the 91d, 182d and 364d bill) were at the lower range of expectation with the exception of the 91d bill (150bps above market level). This, coupled with the Central bank’s intervention through OMO auctions, selling approx NGN400billion of the 119d bill at 11.19% yield, caused a knee-jerk reaction in the short end (3months and less) with an 80-100bps selloff. This correction now puts the floor yield on t-bills at around 10% (a more appropriate level considering the floor of the MPR corridor remains at 10%). The long end, on the back of the low 364d cut-off, reacted accordingly as bonds opened on a very strong note (20bps lower across the tenors). The 2y and 3y bonds were the most volatile, rallying by 70bps and 50bps respectively mid day in thin liquidity, however they met profit-taking sellers at its low and retraced to close only 15bps and 5bps lower than open. Longer tenors witnessed similar but more subtle price action as the 5y and 10y bond closed at 11.87%(-7bps) and 12.37% (-5bps)”

COMMODITIES: West Texas Intermediate headed for its third weekly advance as declining U.S. crude stockpiles signalled rising fuel demand in the world’s biggest oil consumer. WTI for July delivery was at $103.85 a barrel in electronic trading on the New York Mercantile Exchange, up 11 cents.

FX: There was support for the local unit as inflow from an oil company helped ease the pressure. Amount sold was $110 million. Towards the close of market, it became bullish, indicating the pockets of demand that still exist. In the coming week, we expect more oil inflows to further help ease this imminent pressure. Estimated amount to expect is about $400 million.

US: The US economy grew in the first quarter at its slowest rate in a year due to the cold spell in winter. As the weather improves, investors hope the recovery is back on track. Recent data however suggest a less sunny outlook. An unusually cold winter in the United States stunted businesses and consumer spending alike. The economy grew in the first quarter at its slowest rate in a year but as the weather improves, investors hope the recovery is back on track. Recent data however suggest a less sunny outlook.

GERMAN: Strong investment and spendthrift consumers drove the German economy to its fastest growth in three years in the first quarter, but the expansion was helped by milder than usual winter weather and is expected to slow. Data from Germany’s Federal Statistics Office on Friday showed Europe’s largest economy grew by a seasonally-adjusted 0.8 percent on the quarter between January and March. That was in line with an earlier flash estimate. On the year, gross domestic product (GDP) expanded by 2.5 percent.

Macro Economic Indicators
Inflation rate (yoy) for Apr. 2014      7.8%
Monetary Policy Rate current            12%
FX Reserves (Bn $) as at May. 21      37.399

Money Market Highlights

O/N                          10.6917
30 Day                     12.1862
90 Day                     13.2671
180 Day                   14.4579
USD 1 Month          0.1500
USD 2 Months        0.1925
USD 3 Months        0.2272
USD 6 Months        0.3222
USD 12 Months      0.5341

Benchmark Yields
Tenor        Maturity       Yield

91d               21-Aug-14       9.74
182d            04-Dec-14       10.71
364d           07-May-15       11.18
2y                16-Aug-16        11.27
4y                31-Aug-17        11.34
5y                29-Jun-19       11.73

Indicative Currency Exchange Rates
Bid        Offer

EURUSD        1.3598     1.37
GBPUSD         1.6816     1.6919
USDJPY          101.66     101.69
USDCHF         0.8896   0.8998
GBPEUR         1.1931     1.2033
USDZAR         10.2390 10.4445
USDNGN        162.93    163.63
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  162.30/40   161.64/74   162.23/33   162.30/40

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