A Review of the Nigerian Energy Industry

Financial market products & services update

Financial markets28 May 2014, Sweetcrude, Houston, Tx – Local and international financial market products and services update.
NIGERIA: Nigeria, Africa’s largest oil producer, is currently producing only 25 percent of its potential capacity and missing out on an opportunity to earn up to $292 billion in oil exports revenue as a lack of reforms stymies growth in the sector. The country’s oil production, which has never risen above the 3 million barrels per day (b/d) mark, now hovers below 2 million b/d, putting its reserves-to-production ratio at 52 years, higher than is observed in other mature oil-producing nations, according to reports.

FIXED INCOME: The bearish trend witnessed towards close of last week continued into this week and has persisted for the second day running this week. This trend was unleashed by the CBN’s resumption of OMO sale at the OMO window, where tenors between 100 – 122 day bills have been issued for the fourth day in a row. Bond yields rose by an average of 15bp while treasury bills also followed a similar pattern declining by an average of 18bp. It is however pertinent to note that there has been some decent appetite for the bonds at present yields mainly by local Pension Fund Administrators and some offshore investors.

COMMODITIES: West Texas Intermediate was steady. WTI for July delivery was 10 cents higher at $104.21 a barrel in electronic trading on the New York Mercantile Exchange.

FX: USDNGN came under a bit of pressure as there was no sale of USD to ease the pressure. The pair traded a 40-50 range the whole day. Oil flows still expected during the week. CBN is expected to offer $400mio at today’s auction. Ahead of the holiday tomorrow we expect a bit of demand to creep in and put the pair under pressure. Additionally, if no oil flow comes in we might see resistance at the 162.90/00 levels today.

US: The U.S. economy should rebound to a roughly 3 percent annual growth rate after a rocky start to 2014 and put the Federal Reserve on track to raise rates later next year, Atlanta Federal Reserve Bank President Dennis Lockhart said on Tuesday. Lockhart, who does not currently sit on the Fed’s policymaking committee, said he was “not in a rush” for the central bank to end the era of loose monetary policy and begin raising rates.

INDIA: India’s central bank chief, Raghuram Rajan, reiterated on Wednesday what he said is the need for global central banks to be mindful of the impact of their unconventional monetary policy measures on other economies. Rajan proposed that central banks of advanced nations “internalize” the spillover effects from such policies to minimize volatility and disruptions in financial markets elsewhere. Rajan stated that the current non-system in international monetary policy is a source of substantial risk, both to sustainable growth as well as to the financial sector.

Macro economic Indicators

Inflation rate (yoy) for Apr. 2014        7.9%
Monetary Policy Rate current              12%
FX Reserves (Bn $) as at May. 23       37.315

Money Market Highlights

O/N                             11.1250
30 Day                        12.4859
90 Day                        13.4400
180 Day                      14.4054
USD 1 Month              0.1505
USD 2 Months            0.1935
USD 3 Months            0.2299
USD 6 Months            0.3239
USD 12 Months          0.5354

Benchmark yields
Tenor         Maturity        Yield

91d               21-Aug-14         10.52
182d            20-Nov-14         11.20
364d           07-May-15          11.22
2y                16-Aug-16           11.85
4y                31-Aug-17           11.68
5y                29-Jun-19           11.92

Indicative Currency Exchange Rates
Bid          Offer

EURUSD       1.3573        1.3674
GBPUSD       1.6720        1.6821
USDJPY        101.83         101.85
USDCHF       0.8924       0.9025
GBPEUR       1.2260        1.2360
USDZAR       10.3920     10.5980
USDNGN      162.35        163.05
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    162.35/45   162.66/76   162.35/45

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