A Review of the Nigerian Energy Industry

Financial market products & services update

Financial markets 124 June 2014, Sweetcrude, Lagos – Local and international financial markets products and services update.
NIGERIA: FG spends N47bn to service external debt: The Federal Government spent the sum of $297.33m (N47.57bn) in the 2013 fiscal period to service debts owed multilateral institutions, documents obtained from the Budget Office of the Federation have revealed. The Budget Office, in its 2013 consolidated budget implementation report jointly signed by the Minister of Finance, Dr. Ngozi Okonjo-Iweala, and the Director-General, BOF, Dr. Bright Okogu, said the amount was used to settle debt obligations to institutions such as multilateral creditors, and non-Paris Club bilateral creditors, among others. Giving a breakdown of the payments, the report stated that $143.02m (or 48.1 per cent) was paid to multilateral creditors; $40.95m (or 13.77 per cent) was paid to non-Paris Club bilateral creditors; $71.63m (or 24.09 per cent) to commercial and ICM (Eurobond) creditors; and $41.73m (or 14.03 per cent) to others. The report put the country’s external debt stock as of December 31, 2013 at $8.821bn, indicating an increase of 6.75 per cent over the $8.264bn recorded in the third quarter of the year.

US: The Federal Reserve Bank of Chicago’s monthly index of national economic activity climbed higher in May due in part to stronger production and manufacturing data for the month, the bank said June 23. The Fed reported that its Chicago Fed National Activity Index (CFNAI) rose to +.21 in May. That value compares to the upwardly revised value of -.15 for April. The Chicago Fed’s three-month moving average index, which is known as CFNAI-MA3, ended May at +.18. That value was down from +.31 recorded for the previous month. The Fed said the May data showed an economy performing at a rate slightly higher than historical norms.

COMMODITIES: West Texas Intermediate was little changed as militants in Iraq seized more territory and President Barack Obama warned that the crisis may spill over into other countries. WTI for August delivery rose as much as 62 cents to $107.45 a barrel in electronic trading on the New York Mercantile Exchange.

CHINA: Danish Finance Minister Bjarne Corydon is preparing to scale back stimulus as consumer optimism stokes an expansion in Scandinavia’s weakest economy. Corydon stated last week that the economy is slow becoming self-sustaining. Reports last week showed retail sales are at the highest in two years and consumers the most optimistic since before the financial crisis erupted in 2008. The central bank last week raised growth estimates for the $340 billion economy and warned its monitoring declining unemployment that for some professions is at the same level as when the economy was “overheating” in 2006.

FIXED INCOME: On the back of the liquidity in the system, yields on the Bond curve dropped by an average of 20bps on the shorter end of the curve with trading on 17s most conspicuous while the longer end experienced a 5bps drop average. The yields on the T-bills curve rose by average of 1bps on the shorter end with 10/9 particularly experiencing a lot of activity as investors bided a lot in the market; yields at the long end of the curve however remained relatively flat. The excess liquidity in the Money Market is still a key driver of the buy interest that still lingers in both tbills and bond market. There would be T-bill Primary Market Auction on Wednesday 26th June 2014, on offer are the 91, 182, 364 days maturity. The sizes on offer are 21.5bn, 31.8bn and 81.2bn respectively. These maturities are all rollovers of maturing bills.

FX: Boost in USD liquidity of $105 million from an oil company inflow helped curb the USDNGN today. The market traded within a very tight range of about 30 points with the pair capped at 162.70/80. Market opened at 162.65/75 on the back of the reported sales by the oil company, but 162.40 turned out to be the day’s support with a slight retracement seen minutes after the initial sell-off. Market eventually settled within the 162.55-162.70 range for the most part of the day and closed at about the opening level on a relatively quiet day for the pair.

CBN RDAS AUCTION: CBN offered $350 million and sold $342.60 million. Marginal rate was maintained at 155.73 (1% commission excluded) and 23 banks participated.

Macro economic Indicators
Inflation rate (Y-oY) for May. 2014      8.00%
Monetary Policy Rate current               12.00%
FX Reserves (Bn $) as at June 18         37.089

Money Market Highlights

O/N                       10.5000
30 Day                  12.3390
90 Day                  13.2852
180 Day                14.1514
USD 1 Month       0.1520
USD 2 Months     0.1963
USD 3 Months     0.2326
USD 6 Months     0.3253
USD 12 Months    0.5471

Benchmark Yields
Tenor        Maturity         Yield

91d               28-Aug-14         10.25
182d            20-Nov-14          10.51
364d            07-May-15         10.96
2y                 16-Aug-16          11.29
4y                 31-Aug-17           11.26
5y                 29-Jun-19           11.29

Indicative Currency Exchange Rates
Bid        Offer

EURUSD       1.3506      1.3708
GBPUSD        1.6925      1.7127
USDJPY         101.99      102.02
USDCHF        0.8892     0.8993
GBPEUR        1.2414       1.2611
USDZAR        10.4677    10.6748
USDNGN       162.28      162.98
JPYNGN        1.5441       1.6447
CHFNGN       181.02      182.71
EURNGN       220.61      221.97
GBPNGN       276.19      277.60
ZARNGN       14.48        16.28

Hi                Low             Close        Prev.Close
   162.70/80    162.40/50     162.58/68    162.77/87

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