A Review of the Nigerian Energy Industry

Financial market products & services update

Financial markets 122 July 2014, Sweetcrude, Lagos – Local and international financial market products and services update.
FX: We opened the week slightly bid, though NGN remain relatively stable trading within a 20 points band today. We opened at 162.00/10 and moved for the 161.20 level; however falling short initially with a retracement to sub 162.10 seen. We recorded the day’s 162.05 low, after which we started seeing some pockets of demand drag rates up. We were eventually capped at 162.25 for the day, with the pair closing at about the day’s high of 162.15/25. We have an upside bias for the pair this week, with Monday’s price action expected to persist should we fail to see any significant LHS in the market mostly from the oil majors. We have our resistance at 162.50-70 and support at 161.90-162.05

RDAS: CBN sold $399.01 of the $400mio on offer at today’s RDAS. Marginal rate was maintained at 157.2873 (1% commission inclusive) and 22 banks participated at the auction

FIXED INCOME: A strong start to the week for most securities ahead of the rather important MPC meeting outcome (First for the new CBN governor) and also the addition of a new bond to my run (from today). Unimpressive start for the new 2034 bond as was expected, closing at 12.25% on first day of trading (printed at 12.1493% at the auction). The beat goes on for the rest of the curve with better buyers still in the market – T-Bills lower by 10bps and bonds – 8bps. Short week next week because of the Eid holidays so I expect most of the action to be seen this week taking a queue majorly from the T-Bill auction results on Wednesday as we expect the stance of the MPC to remain unchanged.

NIGERIA: Nigeria announced that it is fast-tracking regulations to accelerate research and adoption of genetically modified organisms. This announcement follows news that Kenya may reverse a 2012 ban on GMO imports. In May, Syngenta announced that it is opening a new research facility in Kenya and is expecting growth in Nigeria and West Africa. Syngenta is the fourth-largest seed manufacturer, behind Monsanto, DuPont and Dow Agro Sciences.

US: Global stocks fell as Russian equities slid for a sixth day on concern tensions over Ukraine could lead to deeper sanctions. Treasuries advanced with gold and oil, while corn retreated. The Standard & Poor’s 500 Index dropped 0.5 percent at11:06 a.m. in New York, after the biggest rally since April. The Stoxx Europe 600 Index slipped 0.4 percent as Russian stocks headed for the longest slump since January.

COMMODITIES: West Texas Intermediate crude rose to the highest in more than two weeks as strong refinery demand reduced U.S. inventories Prices gained for a third time in four days. U.S refineries operated at the highest rate in nine years in the week ended July 11, according to the Energy Information Administration.

CHINA: Chinese brokerages, undeterred by the worst performance among the world’s major stock markets, are seeking to raise more than $6.2 billion from initial public offerings as capital constraints squeeze their operations. Guotai Junan Securities Co., China’s third-largest brokerage by revenue, is among six securities firms awaiting approval to sell shares for the first time, according to filings posted on the regulator’s website. They’ll be competing with about 600 companies seeking capital in a market where equities are trading near record-low valuations.

Macro Economic Indicators
Inflation rate (YoY) for June. 2014              8.20%
Monetary Policy Rate current                       12.00%
FX Reserves (Bn $) as at July 18th 2014    38.490

Money Market Highlights

O/N                                  10.9167
30 Day                            12.2369
90 Day                            13.3486
180 Day                          14.2637
USD 1 Month                 0.1546
USD 2 Months               0.1973
USD 3 Months               0.2331
USD 6 Months               0.3274
USD 12 Months             0.5521

Benchmark Yields
Tenor                Maturity            Yield

91d                       09-Oct-14             11.02
182d                     22-Jan-15             11.42
364d                   07-May-15            11.97
2y                         16-Aug-16             10.93
4y                         31-Aug-17             10.82
5y                         29-Jun-19              11.06

Indicative Currency Exchange Rates
Bid          Offer

EURUSD          1.3414       1.3616
GBPUSD           1.6973       1.7177
USDJPY           101.18        101.70
USDCHF           0.8889       0.9092
GBPEUR           1.2532       1.2736
USDZAR        10.6020    10.8249
USDNGN        161.00         163.25
JPYNGN         1.5870        1.6382
CHFNGN         179.30        181.48
EURNGN         217.95       220.19
GBPNGN         275.70       277.92
ZARNGN          14.37         16.75

Hi                    Low               Close           Prev.Close
     162.18/28     162.00/10      162.15/25        161.80/90

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