A Review of the Nigerian Energy Industry

Financial market products & services update

Financial markets24 July 2014, Sweetcrude, Lagos – Local and international financial market products and services update.
FX: Dollar sales from two oil majors yesterday totalling about $110, pushed Monday’s closing momentum even further as the pair traded sub 162. The news of the oil company inflow ensured early gains for NGN as market opened about 20 points below the previous day’s close. We however had the characteristic mild volatility during day. NGN should remain relatively stable in the short term, but with a bias to strengthening as we are in the month-end regime where we get oil majors selling USD to meet their Naira obligations

FIXED INCOME: Activity remained fairly active with T-Bill yields slightly higher as players tried to make room for auction winnings. Auction results at 10.08%, 10.63% and 11.28% yields on the 91, 182 and 364day, respectively with a total of NGN134.88 billion sold. Market liquidity remains supportive of demand with the 1 year having the highest bid/cover at 3.62. Bond market remains pretty quiet.

NIGERIA: Nigeria has the potential to be one of the world’s top 20 economies by 2030 with a consumer base exceeding the current populations of France and Germany, according to McKinsey & Co.

Africa’s biggest economy may expand about 7.1 percent a year through 2030, boosting gross domestic product to $1.6 trillion, possibly pushing it above Netherlands, Thailand and Malaysia, the New York-based company said in a report today. About 60 percent of Nigeria’s estimated population of 273 million by then may live in households earning more than $7,500 a year, fueling a consumer boom, McKinsey said.

US: A gauge of bonds around the world extended its advance to the highest level in 14 months after the International Monetary Fund said the Federal Reserve may keep interest rates near zero for longer than investors anticipate. The Bank of America Merrill Lynch Global Broad Market Index rose to the most since May 2013. It’s heading for a seventh monthly gain in July, the longest winning streak since 2010.Bonds in the index have returned 4.6 percent on average this year as the biggest central banks pledge to keep borrowing costs at record lows. They fell 0.3 percent in 2013.

COMMODITIES: West Texas Intermediate swung between gains and losses after U.S. government data showed crude supplies at the delivery point for New York contracts shrank to the lowest level since 2008. Brent was steady in London

CHINA: A Chinese manufacturing gauge rose to an 18-month high in July, bolstering the government’s chances of meeting its 2014 economic-growth target of about 7.5 percent. The preliminary Purchasing Managers’ Index from HSBC Holdings Plc and Markit Economics was at 52.0, topping the 51.0 median estimate of analysts in a Bloomberg News survey and June’s final 50.7 reading. Numbers above 50 indicate expansion. The Yuan rose to a three-month high as the report suggested stimulus this year including expedited infrastructure spending is supporting growth.

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                           12.4034
90 Day                           13.3081
180 Day                         14.2803
USD 1 Month                0.1555
USD 2 Months              0.1977
USD 3 Months              0.2341
USD 6 Months              0.3288
USD 12 Months            0.5561

Benchmark Yields
Tenor          Maturity           Yield

91d                 23-Oct-14            10.05
182d               22-Jan-15            10.61
364d              07-May-15            11.26
2y                    16-Aug-16            10.86
4y                    31-Aug-17            10.79
5y                    29-Jun-19            11.04

Indicative Currency Exchange Rates
Bids          Offer

USDNGN        161.70         162.40
EURUSD         1.3369        1.3572
GBPUSD          1.6936        1.7138
USDJPY           101.48        101.51
USDCHF          0.8967       0.9069
GBPEUR          1.2545        1.2750
USDZAR          10.4144      10.6168
JPYNGN           1.5464        1.6470
CHFNGN          178.86        180.53
EURNGN          217.60       218.98
GBPNGN          275.38       276.79
ZARNGN           14.51         16.31

Hi               Low         Close         Prev.Close
     162.25/35   161.80/90   161.80/90    161.19/29

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