A Review of the Nigerian Energy Industry

Financial market products & services update

Financial markets 108 July 2014, Sweetcrude, Lagos – Local and international financial markets products and services update.
FX: USDNGN traded a mere 17 points range yesterday on another lacklustre day for the pair. With flows quietly matched, the pair closed at the same opening level with a slight move downward earlier in the day. This week’s anticipated USD inflow from the state owned Oil Company is expected to keep rates in check in the short term, and the mild volatility seen today is expected to hold till the oil company’s USD inflow is confirmed. We expect the pair to remain within the 162 level, with the 163.00 resistance level still expected to hold firm in the short term

Bond yields crept higher yesterday and we also witnessed the short end of the tbill curve seeing some more correction. The tbill auction comes up on Wednesday (9th July). Whilst the reduced supply (no 1-year on offer this auction) points to the possibility of lower stop rates, the CBN intervention via OMO is still happening frequently and makes us expect the cut-offs to be pretty much unchanged from the previous auction. Demand at yesterday’s OMO auction was NGN244bn with stop rates still unchanged at 10.80% discount.

COMMODITIES: WTI crude fell for a seventh day, the longest stretch of losses since December 2009. Brent touched a three-week low as Libya prepared to increase exports from two ports closed for a year (Libya has 7.5mill barrels of oil ready to be exported).

Corn fell to the lowest in almost four years as improving crop conditions bolstered expectations for record harvest in the U.S., the world’s biggest grower. Soybeans dropped to the lowest since 2011.

NIGERIA: As part of efforts to expand its investments frontiers, a South African investor has concluded plans to plough US$200mill into the agricultural sector in Nigeria. The investor is planning to invest the sum in agricultural development in Edo, Enugu, and Benue States. Lee Maeba, board chairman, Nigerian Institute of Oil Palm Research (NIFOR), gave the hint in Benin City during a courtesy visit to the Edo State Governor. This is expected to generate over 2,500 direct and indirect jobs for Nigerians, especially the people of Edo State.

US: Goldman Sachs Group Inc. brought forward its forecast for the Federal Reserve to raise interest rates after U.S. employers added more jobs last month than forecast, sending three-year Treasuries lower for a fourth day. The Central bank will increase its benchmark interest-rate target in the third quarter of 2015, rather than the first quarter of 2016, according to a report from Goldman Sachs.

INDIA: India’s railway minister said he will seek cabinet approval for foreign investment in rail infrastructure as Prime Minister Narendra Modi strives to modernize Asia’s oldest network. The move has potential to bring more business for companies such as General Electric Co. and Bombardier Inc. as Modi aims to fix the nation’s creaky infrastructure with new high-speed trains and urban-transport services.

Macro Economic Indicators
Inflation rate (YoY) for May. 2014            8.00%
Monetary Policy Rate current                   12.00%
FX Reserves (Bn $) as at July 4th 2014  37.89

Money Market Highlights

O/N                                10.9167
30 Day                           12.1016
90 Day                           13.2251
180 Day                         14.0856
USD 1 Month                0.1534
USD 2 Months              0.1928
USD 3 Months              0.2341
USD 6 Months              0.3283
USD 12 Months            0.5562

Benchmark Yields
Tenor        Maturity         Yield

91d              09-Oct-14           10.98
182d            08-Jan-15           10.92
364d           07-May-15           10.79
2y                16-Aug-16            11.36
3y                31-Aug-17            11.38
5y                29-Jun-19            11.48

Indicative Currency Exchange Rates
Bid            Offer

EURUSD      1.3508         1.371
GBPUSD       1.7035         1.7237
USDJPY        101.78         101.81
USDCHF       0.888          0.8982
GBPEUR       1.2491          1.2694
USDZAR     10.6597        10.8690
USDNGN      162.04         163.04
JPYNGN        1.5450         1.6486
CHFNGN      180.99         183.00
EURNGN      220.31         222.09
GBPNGN      277.57          279.49
ZARNGN       14.19             16.01

                             Hi               Low            Close     Prev.Close
USD/NGN   162.70/80    162.55/65   162.65/75   162.65/75

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