A Review of the Nigerian Energy Industry

Financial market products & services update

Financial markets31 July 2014, Sweetcrude, Lagos – Local and international financial market products and services update.
NIGERIA: Standard Chartered Bank said it is more than doubling its financing commitment for power projects in Africa to 5 billion USD from previous 2 billion USD. The London-based bank said it is increasing the amount pledged for the US government’s Power Africa Program, because it reached the initial financial commitment in the first year of the program. President Barack Obama announced Power Africa in July 2013, pledging to use a combination of private funding and U.S. political and technical assistance to double Sub- Saharan Africa’s power generation.

FX: NGN remained relatively stable, trading within a 23 points range on Wednesday. The pair opened slightly bid, but we were capped at 161.98 with news of an oil major selling an undisclosed amount of USD enough to prevent a further uptick in rates. We had slight intraday gains on the back of the inflow, but failed a break below 161.75. The pair eventually settled around the pretty tight 161.75 – 96 range and eventually closed at around the opening level. We expect the 162.00 resistance level to hold short term, maintaining our downside bias for the pair.

FIXED INCOME: Another OMO auction yesterday with NGN152bn sold triggered another set of bearish sentiments at week open. Cut-off remained unchanged at 10.80% discount (11.24% yield). Liquidity remains thin with overnight rate at 12.50%. NGN113 billion of 31 July bills maturing today will give some support to the liquidity in the system. Tbill auction next week Wednesday with the three tenors on offer.

COMMODITIES: West Texas Intermediate dropped for a fourth day and slipped below $100 as gasoline stockpiles rose and demand declined in the U.S., the world’s biggest oil user. WTI for September delivery slid as much as $1.11 to $99.16 a barrel in electronic trading on the New York Mercantile Exchange and was at $99.53 at 2:53 p.m. Singapore time.

EUROPE: German unemployment fell for the first time in three months in a sign that Europe’s largest economy is gathering pace after a second-quarter slowdown. The number of people out of work dropped a seasonally adjusted 12,000 to 2.9 million in July, the Nuremberg-based Federal Labor Agency said today. Germany has led the euro area’s recovery and a survey by GfK SE shows that consumer confidence in August will be the strongest since 2006. The Bundesbank predicts that while the nation’s economic growth may have stagnated in the three months through June, it will pick up again this quarter.

CHINA: China’s stocks rose, sending benchmark indexes to their largest monthly gain since December 2012, amid optimism government stimulus will boost economic growth. The Shanghai Composite Index rose 0.9 percent to 2,201.56 at the close, the highest level since Dec. 12. The measure rallied 7.5 percent this month amid signs of monetary easing, along with accelerated government spending and gains in manufacturing industries.

Macro Economic Indicators
Inflation rate (YoY) for June. 2014              8.20%
Monetary Policy Rate current                      12.00%
FX Reserves (Bn $) as at July 24th 2014   38.942

Money Market Highlights

O/N                                   10.9167
30 Day                              12.9151
90 Day                              13.8839
180 Day                            14.7247
USD 1 Month                   0.1558
USD 2 Months                 0.1985
USD 3 Months                 0.2396
USD 6 Months                 0.3325
USD 12 Months               0.5686

Benchmark Yields
Tenor             Maturity          Yield

91d                    23-Oct-14           10.82
182d                  22-Jan-15           10.62
364d                 07-May-15          10.70
2y                      16-Aug-16           11.19
3y                      31-Aug-17            11.10
5y                      29-Jun-19            11.28

Indicative Currency Exchange Rates
Bid         Offer

EURUSD       1.3394       1.3404
GBPUSD        1.6874       1.6884
USDJPY         102.90      103.30
USDCHF        0.9085     0.9105
GBPEUR        1.2599      1.2609
USDZAR       10.7030   10.8030
USDNGN       161.20      161.95
JPYNGN        1.5666       1.6166
CHFNGN       177.44       181.44
EURNGN       215.91       219.91
GBPNGN        272.01      276.01
ZARNGN        15.06         17.06

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