A Review of the Nigerian Energy Industry

Financial market products & services update

Financial markets16 July 2014, Sweetcrude, Lagos – Local and international financial markets products and services update.
NIGERIA: The Senate yesterday passed N271.1 billion budget for the Federal Capital Territory (FCT) as well as N322.6 billion for the Niger Delta Development Commission (NDDC) for the year 2014. The FCT budget consists of N161.8 billion as capital expenditure, N109.2 billion as recurrent expenditure, N60.037 billion as overhead cost and N49.2 billion as personnel cost. While presenting the report of the FCT committee to the Senate ahead of the passage, the Vice-Chairman of the committee, Senator Domingo Obende, said the sum of N16 billion was earmarked for the development of the health sector, including the provision of free antenatal treatment and ante retro-viral drugs for HIV/AIDS patients.

FIXED INCOME: Decent demand seen yesterday on AUG 2016s and APR 2017s closing 8bps and 4bps lower respectively. O/N rates closing at 10.91% with liquidity slightly in excess of NGN200billion. T-bill secondary market trading still feels weak though with yields marginally higher (1bps). Focus will be on the bond auction today. In post-auction trading, the Central Bank of Nigeria’s MPC meeting on 21-22 July is a key event, though we expect no change in the current policy stance.

COMMODITIES: West Texas Intermediate rebounded from the lowest price since May as China’s economic growth exceeded forecasts and crude stockpiles shrank in the U.S., signaling increased demand from the world’s two biggest oil consumers. WTI for August delivery climbed as much as 63 cents to $100.59 a barrel in electronic trading on the New York Mercantile Exchange.

FX: Further gains for NGN yesterday, closing at the 161 level for the first time in about 9 weeks, as we continue to see more sales by oil companies hit the market. We had about $50 million oil inflow yesterday plus a host of USD sales with market’s appetite for USD relatively flat. The news of the oil company in the market ensured we moved down at open, but market earlier resisted the appreciation, with a retracement seen at the 162.10 level. This turned out to be short-lived as rates headed south again after we recorded the day’s 162.30 high. The pair eventually broke the 162.00 support level towards close of market.

US: Federal Reserve Chair Janet Yellen said U.S. labor markets are far from healthy and signaled the Fed will keep monetary policy loose until hiring and wage data show the effects of the financial crisis are “completely gone.” Despite strong recent jobs reports and other signs of continuing recovery, Yellen emphasized in testimony to the Senate Banking Committee that she won’t conclude the economy has recovered until wages start rising and discouraged workers return to the labor force. In its latest semiannual report to Congress, the Fed did cite unease about some aspects of U.S. securities markets, taking the unusual step of singling out biotechnology and social media stocks for their “stretched” valuations.

CHINA: China’s economy grew slightly faster than expected in the second quarter as a burst of government stimulus paid dividends, but analysts said Beijing will likely need to offer further support to meet its growth target for 2014. Analysts remain cautious about China’s economic outlook, noting that the pick-up in growth was driven more by government support than a genuine recovery in momentum, as evidenced by a surprising surge in lending by state-controlled banks in June. The world’s second-largest economy grew 7.5 percent in April-June from a year earlier, the statistics bureau said on Wednesday.

Macro Economic Indicators
Inflation rate (YoY) for May. 2014             8.00%
Monetary Policy Rate current                     12.00%
FX Reserves (Bn $) as at July 14th 2014   38.265

Money Market Highlight

O/N                           10.9083
30 Day                      12.4580
90 Day                      13.4255
180 Day                    14.4245
USD 1 Month           0.1542
USD 2 Months         0.1958
USD 3 Months         0.2331
USD 6 Months         0.3264
USD 12 Months       0.5519

Benchmark Yields
Tenor          Maturity       Yield

91d                 02-Oct-14        10.70
182d               08-Jan-15       10.75
364d               07-May-15      10.61
2y                    16-Aug-16       11.15
4y                    31-Aug-17       11.17
5y                    29-Jun-19       11.37

Indicative Currency Exchange Rates
Bid        Offer

EURUSD        1.3452      1.3654
GBPUSD         1.7047      1.7249
USDJPY          101.69      101.71
USDCHF         0.8917     0.9019
GBPEUR         1.2551      1.2754
USDZAR        10.5880   10.7901
USDNGN        162.53      163.23
JPYNGN         1.5512       1.6521
CHFNGN        180.79     182.46
EURNGN        220.07    221.44
GBPNGN         278.60    280.01
ZARNGN          14.33      16.14

Hi                 Low              Close       Prev.Close
162.25/35    161.80/90     161.80/90    162.19/29

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