A Review of the Nigerian Energy Industry

Financial market products & services update

Financial markets18 July 2014, Sweetcrude, Lagos – Local and international financial market products and services update.
NIGERIA: The Central Bank of Nigeria (CBN) has reiterated that its modifications to the guidelines on the regulation of Bureau de Change (BDCs) in Nigeria are aimed at conserving the country’s foreign reserves, among other objectives. This position was made known by the CBN Governor, Mr. Godwin Emefiele during an interactive session with the House of Representatives Committee on Banking and Currency. Addressing members of the Committee, Emefiele explained that modifications had to be made to the guidelines following observations that the current operations of BDCs in Nigeria had deviated from the objectives for which they were licensed.

FIXED INCOME: Fairly active day with short dated tbills (35days and below) being the star performers closing lower by about 25bps average. Bond yields reacted sharply at yesterday’s open to the auction results with yields grinding lower. Some retracement was noticed from midday and all in all, bond yields closed lower by just 1bps. The new JULY 2034s are not yet trading in the secondary market after only NGN35billion was issued which is below the SRO’s size requirement for a security to start to trade in the secondary market. Average yield on t-bills at 10.76% and on bonds – 11.65%.

FX: Market remained boosted with USD liquidity, keeping rates relatively subdued. We had an oil company in yesterday, selling an undisclosed amount of USD, but providing enough liquidity to ensure the pair stayed below 162. We broke through the 162.00 level early yesterday from a 161.80/90 open, recording a 162.07 high but we saw a swift reversal once news of the oil company USD sales filtered into market. We subsequently spent the rest of the day at the 161 level, but failing a break of the 161.70 support again. Few purchases at the 161.65/75 level ensured we retraced and eventually closed at 161.80/90 for the 3rd consecutive day.

COMMODITIES: West Texas Intermediate headed for the first weekly gain in a month after a Malaysian Air passenger jet was shot down in Ukraine and Israel sent ground forces into the Gaza Strip. WTI for August delivery rose as much as 75 cents to $103.94 a barrel in electronic trading on the New York Mercantile Exchange and was at $103.73.

US: The number of Americans filing new claims for unemployment benefits unexpectedly fell last week, pointing to sustained momentum in the economy even as home building fell for a second straight month in June. The economy’s improving fortunes were underscored by another report on Thursday showing manufacturing activity in the mid-Atlantic region accelerated to its highest level in nearly 3-1/2 years this month.

CHINA: Chinese Premier Li Keqiang said economic growth of slightly more or less than 7.5 percent this year would be acceptable as long as it still led to new jobs and higher wages, reports stated on Thursday. Li Keqiang stated that the growth rate of slightly higher or lower than 7.5 percent is acceptable, as long as China’s development created jobs, boosts incomes, has quality and efficiency, favors energy savings and environmental protection, and is not an exaggeration. Analysts suggested Li’s latest remarks signaled some flexibility in hitting the annual growth target and put more emphasis on reform than simple expansion.

Macro Economic Indicators
Inflation rate (YoY) for June. 2014               8.20%
Monetary Policy Rate current                        12.00%
FX Reserves (Bn $) as at July 16th 2014     38.369

Money Market Highlights

O/N                           10.7083
30 Day                      12.5755
90 Day                      13.3960
180 Day                    14.3341
USD 1 Month           0.1562
USD 2 Months         0.1960
USD 3 Months         0.2336
USD 6 Months         0.3271
USD 12 Months       0.5544

Benchmark Yields
Tenor       Maturity        Yield

91d              02-Oct-14         10.69
182d           08-Jan-15         10.74
364d           07-May-15        10.61
2y                16-Aug-16         11.06
4y                31-Aug-17         11.08
5y                29-Jun-19         11.35

Indicative Currency exchange Rates
Bid           Offer

EURUSD         1.3422         1.3624
GBPUSD          1.6998        1.7200
USDJPY           101.38         101.40
USDCHF          0.8929       0.9030
GBPEUR          1.2543         1.2746
USDZAR        10.5954      10.8026
USDNGN         161.40         162.10
JPYNGN          1.5450         1.6458
CHFNGN         179.29         180.98
EURNGN         218.05         219.42
GBPNGN          275.87         277.28
ZARNGN           14.22           16.02

                             Hi              Low           Close       Prev.Close
USD/NGN   162.00/10    161.65/75   161.80/90   161.78/88

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