A Review of the Nigerian Energy Industry

Financial market products & services update

Financial markets 125 August 2014, Sweetcrude, Houston – Local and international financial market products and services update.
NIGERIA: Worried by the country’s rising debt profile, the Trade Union Congress of Nigeria (TUC) has cautioned the Federal Government to check its resort to foreign loans before the future of Nigeria is mortgaged to foreign creditors. The Director-General of the DMO, Dr. Abraham Nwankwo, had put the country’s domestic and foreign debt at $66 billion dollars (over N10 trillion), the external component being $9.38 billion. Reacting to the huge debt profile, TUC, in a statement issued at the weekend expressed worry that while Nigeria celebrated with fanfare the external debt exit in 2005 under the regime of President Olusegun Obasanjo, by December 2010, the external debt portfolio had climbed to $4.78 billion.

FX: NGN closed last week below 162 at 161.85/95, after another very quiet trading session. The pair opened at 162.00/10, continuing Thursday’s momentum. We retraced slightly and spent the rest of the day within the 161.88-162.02 range with no sustained momentum.

FIXED INCOME: Friday was all about the MAR 2024s. The Mar ’24 yield fell to the lowest level since the tenor was introduced (March 2014) at 11.75%, before it edged higher to close at about 11.94%. We also saw the Jan 2022s tagging along to close at 11.78%. Since inception, issuance in the Mar’24s has risen to NGN260bn (USD1.6bn). Issuance on this tenor is expected to remain at about NGN50bn per month over the rest of the third quarter of this year, with the Debt Management Office offering NGN45-55bn of the paper for the 17 September auction. FAAC allocation finally hit the system on Friday with O/N rates closing at 10% after closing at an average of 13.85% last week. Tbill market was relatively muted.

USA: The Federal Reserve should move cautiously in deciding when to raise interest rates given the U.S. labor market remains bruised from the Great Recession, Fed Chair Janet Yellen said on Friday amid calls from policy hawks for a near-term rate hike. In a speech at the Fed’s annual central bank conference, Yellen laid out in detail why she feels the unemployment rate alone is inadequate to evaluate the strength of the jobs market and why the central bank needs to step gingerly.

COMMODITIES: Brent fell for a second day amid speculation that turmoil across the Middle East won’t threaten crude supplies. Brent for October settlement declined as much as 64 cents to $101.65 a barrel on the London-based ICE Futures Europe exchange and was at $102.19.

EUROPE: Italy is asking the European Union to exclude spending on infrastructure projects from the calculation of national budget deficits, Transport Minister Maurizio Lupi was quoted. Italy, with the second-highest public debt in the euro zone as a proportion of national output, has led a drive for greater flexibility in the way EU budget rules are applied, to encourage economic growth and investment.

Macro Economic Indicators
Inflation rate (YoY) for June. 2014                   8.20%
Monetary Policy Rate current                            12.00%
FX Reserves (Bn $) as at August 20th 2014   39.586

Money Market Highlights

O/N                               11.3750
30 Day                          12.7938
90 Day                          13.3506
180 Day                         14.1455
USD 1 Month                0.1550
USD 2 Months              0.1951
USD 3 Months              0.2384
USD 6 Months              0.3305
USD 12 Months            0.5656

Benchmark Yields
Tenor              Maturity            Yield

91d                     23-Nov-14             9.99
182d                   22-Mar-15           10.96
364d                  07-Aug-15             11.36
2y                       16-Aug-16             11.16
3y                       31-Aug-17              11.13
5y                       29-Jun-19             11.18

Indicative Currency Exchange Rates
Bid          Offer

USDNGN      161.55        162.30
EURUSD       1.3094       1.3387
GBPUSD        1.6475       1.6687
USDJPY         104.05      103.78
USDCHF        0.9112       0.9160
GBPEUR        1.2375       1.2672
USDZAR        10.5881     10.6911
JPYNGN         1.5100       1.6112
CHFNGN       176.92       178.64
EURNGN       214.50      215.88
GBPNGN       268.07      269.48
ZARNGN        14.24        16.06

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