A Review of the Nigerian Energy Industry

Financial market products & services update

Financial markets03 June 2014, Sweetcrude, Houston, Tx – Local and international financial market products and services update.
NIGERIA: Nigeria is in the process of a bilateral trade and investment enhancement with Belgium, in a bid to open up more areas of investment in the Nigerian agricultural and manufacturing sector, the Ambassador of Nigeria to Belgium, Mr. Felix Awanbor, said Monday. Awanbor, who led a group of Belgian investors to the country, said the trade mission is coming at a good time when the nation is ranked the largest economy in Africa. He said the mission intends to explore more areas of business and investment, towards creating ample employment opportunities for Nigeria’s teeming unemployed youths.

FIXED INCOME: As expected, all bond tenors were heavily bought yesterday, as yields continued to correct towards pre-selloff levels largely driven by market sentiments aligned with perceived overdone yield levels. The CBN continued to maintain 10.80% discount (11.22yield) cutoff levels, which is unlikely to change soon. Local and offshore appetite at present levels remains upbeat and this trend is likely to continue till Wednesday, when market is expected to slow in expectation of Treasury bills cutoff levels. Market liquidity is still very high despite the OMO sale and this will continue to drive yields lower. At the OMO window yesterday, NGN50bn was offered, NGN101.6bn demanded and NGN84.6bn sold at 10.80% discount. The 2016s and 2017s are likely to be heavily bought tomorrow while market is expected to be cautious on the 2022s and 2024s.

COMMODITIES: West Texas Intermediate swung between gains and losses amid speculation that crude stockpiles fell from a near-record high in the U.S., the world’s biggest oil consumer. WTI for July delivery was at $102.67 a barrel in electronic trading on the New York Mercantile Exchange, up 20 cents.

FX: Flows from oil majors of about $131.6 million eased the pressure on USDNGN yesterday, with trading hitting the 161 levels for sometime during the day. Some more appreciation is expected as we wait for the state owned Oil Company to sell between $400 million and $500 million this week. Additionally, the new CBN governor resumed office yesterday with no effects on market.

CBN RDAS AUCTION: CBN offered $300 million and sold $254.83 million, marginal rate is 155.73 (1% commission excluded). 18 banks participated.

US: Long-term unemployment in the United States should fall toward its pre-recession level as the recovery proceeds, new Federal Reserve research has concluded, the latest entry in one of the United States’ central economic debates. In a pair of papers released on Monday, Fed research economist Christopher Smith analyzed state-level data and found that long-term unemployment rates were edging down in states where short-term unemployment was approaching or had already dropped below pre-recession levels. He also found the level of long-term joblessness in a state was as closely tied to wage rates as the level of short-term unemployment.

INDIA: India’s central bank kept its key policy rate on hold on Tuesday, but eased rules to spur bank lending in a move set to be welcomed by the new pro-business government as it seeks to revive economic growth. The Reserve Bank of India also hinted it would not raise interest rates further as long as inflationary pressures continued to ease. Governor Raghuram Rajan kept the country’s key policy rate unchanged at 8 percent, as widely expected, but reduced the mandatory amount of bonds lenders must park at the RBI – called the statutory liquidity ratio – by 50 basis points to 22.5 percent of deposits, starting in mid-June.

Macro Economic Indicators
Inflation rate (yoy) for Apr. 2014          7.9%
Monetary Policy Rate current                12%
FX Reserves (Bn $) as at May. 29         37.147

Money Market Highlights

O/N                            10.7500
30 Day                       12.4937
90 Day                       13.5002
180 Day                     14.3776
USD 1 Month            0.1510
USD 2 Months          0.1905
USD 3 Months          0.2272
USD 6 Months          0.3219
USD 12 Months        0.5345

Benchmark Yields
Tenor         Maturity        Yield

91d                28-Aug-14        10.41
182d             04-Dec-14        10.73
364d            07-May-15        11.26
2y                 16-Aug-16         11.38
4y                 31-Aug-17         11.48
5y                 29-Jun-19         11.77

Indicative Currency Exchange Rates
Bid            Offer

EURUSD          1.3552       1.3654
GBPUSD          1.6707       1.6811
USDJPY           102.31       102.34
USDCHF          0.8936      0.9038
GBPEUR          1.2270       1.2371
USDZAR          10.5359     10.7431
USDNGN         161.95        162.65
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
      162.67/77    162.20/30   162.25/35    162.67/77

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