A Review of the Nigerian Energy Industry

Financial market products & services update

Financial markets30 May 2014, Sweetcrude, Houston, Tx – Local and international financial market products and services update.
NIGERIA: The recent rebasing of Nigeria’s Gross Domestic Product (GDP), which makes Nigeria the largest economy in Africa and 26th in the world, has generated increased interest in trade in the country, the Lagos Chamber of Commerce and Industry (LCCI) has disclosed. Michael Olawale-Cole, the vice president of the chamber and chairman, Trade Promotion Board and organiser of the Lagos trade fair stated that they have been receiving requests for participation from both regular and new foreign exhibitors since the rebasing outcome was made public.

FIXED INCOME: OMO announcement was made on Wednesday and bids were submitted but there was no sale. The Demand at the OMO auction is beginning to weaken considerably when compared to the bids seen last week. The selloff in the market on Wednesday remained unabated as sentiments continued to favour expected continued rise in yields. A key determinant of how much higher or lower yields are headed from current levels is hinged mainly on OMO sales. Market liquidity despite the OMO sale was still positive. Amount offered was NGN50bn and subscription was NGN58bn with NO sale at the OMO auction. Bond yields rose across board by 28bp while Tbill yield declined by 16bp.

COMMODITIES: West Texas Intermediate headed for its first monthly advance since February as crude inventories shrank at the delivery point for New York contracts. WTI for July delivery was at $103.38 a barrel in electronic trading on the New York Mercantile Exchange, down 20 cents.

FX: Another round of pressure on the USDNGN as there is still a USD shortage in the market, forcing rates to further depreciate a further 20points from Tuesday’s close. CBN offered $300 million at Wednesday’s RDAS auction. With an attendant OMO auction that has been a constant since the start of the week. There were no oil inflows as expected. Resistance level today might be 162.90/00. We do not expect much volatility as market participants/corporates are likely to still be in the holiday mode.

CBN RDAS AUCTION: CBN sold $244.48 million of the $300 million on offer at Wednesday’s auction. Marginal rate was 155.73 (1% excluded). 20 banks participated.

US: Kansas City Federal Reserve Bank President Esther George said Thursday she is open to leaving the U.S. central bank’s balance sheet big even as it withdraws accommodation, a comment that reveals the extent of uncertainty at the Fed over future policy. The Fed’s balance sheet now tops $4 trillion after years of buying bonds to boost the economy, a policy that George has opposed for years. At Stanford University’s Hoover Institution conference on central banking, she reiterated her view that the Fed should start to raise rates “shortly after” it ends its current round of bond-buying, and that rate rises should be steeper than many now expect.

CHINA: China urged local governments on Wednesday to quicken the pace of budgetary spending to guarantee construction of key projects and boost the slowing economy. The finance ministry also said local fiscal agencies must finish allocating 2014 budget money by the end of June, or risk the money being called back by the central government by the end of September.

Macro Economic Indicators
Inflation rate (yoy) for Apr. 2014 7.9%
Monetary Policy Rate current 12%
FX Reserves (Bn $) as at May. 27 37.147

Money Market Highlights
O/N 11.3750
30 Day 12.5896
90 Day 13.6077
180 Day 14.5600
USD 1 Month 0.1510
USD 2 Months 0.1935
USD 3 Months 0.2274
USD 6 Months 0.3219
USD 12 Months 0.5344

Benchmark Yields
Tenor Maturity Yield

91d 21-Aug-14 10.57
182d 20-Nov-14 10.92
364d 07-May-15 11.22
2y 16-Aug-16 12.14
4y 31-Aug-17 12.34
5y 29-Jun-19 12.41

Indicative Currency Exchange Rates
Bid Offer

EURUSD 1.3561 1.3664
GBPUSD 1.6701 1.6804
USDJPY 101.63 101.66
USDCHF 0.8919 0.9021
GBPEUR 1.2257 1.2356
USDZAR 10.3386 10.5459
USDNGN 162.41 163.11
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 162.75/85 162.30/40 162.71/81 162.35/45

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