A Review of the Nigerian Energy Industry

Financial market products & services update

Financial markets 106 June 2014, Sweetcrude, Houston, Tx – Local and international financial market products and services update.
NIGERIA: FEC Approves $242.3m for Lagos State Projects: The Federal Executive Council (FEC) yesterday approved $200 million in support of the second Lagos State Development Policy Operation. The council equally approved that the Ministry of Finance obtains an IDA credit in the sum of $42.3 million as additional financing for the Lagos-Epe secondary education project

FIXED INCOME: At market open, there was an initial selloff that reversed shortly after the policy direction of the New CBN governor Godwin Emefiele’s was being broadcast. His statement does suggest a gradual move towards lower interest rates. As at close, yield declined by 20bp average across all tenors. We expect to see a continued bullish run at tomorrow’s open as market looks to position ahead of the gradual implementation of the policy direction. OMO was offered today at a discount of 10.80% discount (11.242 yield) with NGN128.6bn sold. OMO issuance is likely to continue despite the governor’s statement today which should help moderate market yields. Our view is that the support for the policy direction in terms of reserves buffers, fiscal policy stance, infrastructure needs and inflation are yet to be in place.

FX: The pressure on the Naira continued yesterday as the currency weakened by N1.30 to close at N163.70 from N162.40 the previous day. At this point market would be cautious in buying USD with the huge NNPC flows still expected and also hitting the N164 band would trigger a Central bank’s intervention. Might just see spot lower today as some players would seek to go oversold here.

US: U.S. stocks rose, sending benchmark indexes to all-time highs, as the European Central Bank announced measures to counter deflation and investors awaited tomorrow’s employment report. Twitter Inc. added 4.5 percent after Pacific Crest Securities started coverage of the shares with a rating similar to buy. Ciena Corp. surged 18 percent as earnings beat analyst estimates.

COMMODITY: West Texas Intermediate fell for a second day after inventories of gasoline and distillate fuels increased in the U.S., the world’s biggest oil consumer. Brent slipped as the European Central Bank cut its deposit rate below zero. Futures dropped as much as 0.5 percent in New York. Gasoline stockpiles increased by 210,000 barrels to 211.8 million in the seven days ended May 30.

INDIA: India’s 2023 bonds rose for a third day, with the yield at the lowest level since January, after the central bank signaled it would ease monetary policy if inflation slows faster than targeted. Reserve Bank of India Governor Raghuram Rajan left the benchmark repurchase rate at 8 percent for a second straight meeting on June 3, as predicted by all 38 economists.

Macro Economic Indicators
Inflation rate (yoy) for Apr. 2014      7.90%
Monetary Policy Rate current            12.00%
FX Reserves (Bn $) as at Jun. 2         36.81

Money Market Highlights

O/N                              10.9167
30 Day                         12.3719
90 Day                         13.3390
180 Day                       14.3127
USD 1 Month              0.1510
USD 2 Months           0.1908
USD 3 Months           0.2306
USD 6 Months           0.3224
USD 12 Months         0.5345

Benchmark yields
Tenor            Maturity         Yield

91d                   04-Sep-14          10.41
182d                 04-Dec-14          10.92
364d                07-May-15          11.30
2y                     16-Aug-16           11.32
3y                     31-Aug-17           11.43
5y                     29-Jun-19           11.80

Indicative Currency Exchange Rates
Bid            Offer

EURUSD          1.3548        1.3748
GBPUSD           1.6712        1.6915
USDJPY            102.16        103.58
USDCHF          0.8817       0.9020
GBPEUR          1.2219        1.2421
USDZAR          10.5525      10.7685
USDNGN         162.00       164.00
JPYNGN          1.5885        1.6097
CHFNGN         182.37        184.52
EURNGN        222.10        224.30
GBPNGN         273.70        276.05
ZARNGN         14.45           18.45

                              Hi               Low           Close       Prev.Close
USD/NGN    163.80/90   162.60/70   163.70/80   162.40/50

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