A Review of the Nigerian Energy Industry

Financial markets products & services update

Financial markets11 July 2014, Sweetcrude, Lagos – Local and international financial markets products and services update.
FX: The pair opened yesterday with slight gains as the anticipated USD sales from the state owned oil company eventually came about – estimated size is $400-$500 mill. The early gains by NGN were soon reversed as a move sub 162 was prevented with emergence of bids at the 161.95-162.10 levels; the 162.00 support level kept firm as counterparties took profit on short positions created ahead of the USD liquidity injection from the oil company. We soon found the pair trading above the opening level, though capped at 162.45 for the day. We eventually settled within a tight range of 162.20-162.40 and closed very slightly below previous level at 162.30/40.

FIXED INCOME: There was nothing for market to digest from previous day’s auction result and no intervention from the CBN via OMO sales caused focus to shift more on the bond auction next week Wednesday. The market went quiet from about midday yesterday. 18-June-15 and 25-June-15 are still the best performing bills, both closing around 9.85% discount. We expect another quiet session today.

COMMODITIES: WTI headed for a third weekly drop as Libya boosted its crude output and gasoline stockpiles expanded in the U.S., the world’s biggest oil consumer. Brent declined in London. Libya’s supply gained as Sharara field resumed production and two oil-export terminals reopened. Fighting in Iraq has not spread to the country’s south, home to three-quarters of its output.

Gold held near a four-month high, heading for the longest run of weekly gains since March, as concern Europe’s economy remains vulnerable to shocks and rising tension in the Middle East boosted haven demand.

NIGERIA: The Senate has unanimously approved its committee on Finance’s recommendation directing that the Nigerian National Petroleum Corporation (NNPC) should refund to the Federation Account, the total sum of US$262mill being balance of the gross lifting under the third party financing oil deal. However, the senators rejected the recommendation that the federal government should remove the subsidy on petroleum products because of the alleged misapplication of the billions of dollars voted annually for it.

US: Consumer sentiment improved last week as Americans were more upbeat about the U.S. economy than at any time in the past six years. More hiring and fewer firings this year have helped firm sentiment, setting the stage for a pickup in consumer spending that will probably bolster the economy. Middle-income and wealthier households were among those turning more optimistic last week as stocks rose to a record and gasoline prices stabilized.

INDIA: India’s budget targets are credit positive according to a report by Fitch. India’s objectives of returning growth to 7%-8% within 3years and maintaining tight fiscal consolidation path looks ambitious. However there are still uncertainties and risks regarding implementation of key policies necessary to achieve both growth and fiscal deficit targets.

Macro Economic Indicators
Inflation rate (YoY) for May. 2014             8.00%
Monetary Policy Rate current                    12.00%
FX Reserves (Bn $) as at July 9th 2014   38.10

Money Market Highlights

O/N                               10.9167
30 Day                           12.5163
90 Day                           13.3590
180 Day                          14.3749
USD 1 Month                 0.1515
USD 2 Months               0.1918
USD 3 Months               0.2336
USD 6 Months               0.3272
USD 12 Months             0.5492

Benchmark Yields
Tenor             Maturity         Yield

91d                    09-Oct-14           10.92
182d                  08-Jan-15          10.91
364d                  07-May-15         10.84
2y                       16-Aug-16          11.44
3y                       31-Aug-17           11.40
5y                       29-Jun-19           11.51

Indicative Currency Exchange Rates
Bid        Offer

EURUSD          1.3519      1.372
GBPUSD          1.7047      1.7248
USDJPY           101.32      101.35
USDCHF          0.8864     0.8965
GBPEUR          1.2489      1.2691
USDZAR          10.6217     10.8278
USDNGN         162.07      162.77
JPYNGN           1.5525      1.6532
CHFNGN          181.35      183.04
EURNGN         220.53      221.88
GBPNGN          277.82      279.20
ZARNGN           14.24        16.04

                              Hi                 Low          Close      Prev.Close
USD/NGN     162.25/35    162.38/48   161.95/05   162.37/47

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