A Review of the Nigerian Energy Industry

Financial market products & services update

Financial markets03 September 2014, Sweetcrude, Houston – Local and international financial market products and services update.
FX: Lacklustre trading day as USDNGN traded a range of 162.35 – 162.60. No Left Hand Side flows in today but market participants are a bit cautious to buy ‘expensive monies’ while we still expect the state owned oil companies to sell dollars (Estimated around $350m00-$450m).

FIXED INCOME: Monday saw demand for bonds and bills were offered but Tuesday was the exact opposite. Better buyers of short dated (1 week to 2 month) paper and sellers of bonds. Profit taking in some of the recent outperformers in the bond space. March 2024s and January 2022s obviously felt weakest. OMO bills trading heavy as Wednesday’s auction draws nigh and street looks to lighten up inventory. Two new OMO bills (01 Jan 2015 and 15 Jan 2015) added to my run.

NIGERIA: Nigerian lenders are gearing up to sell the most debt in four years to bolster cash reserves, taking advantage of a drop in borrowing costs before the central bank increases how much capital they need to hold.

Banks may raise as much as $2.5 billion this year compared with $2 billion in 2013,. International debt sales are becoming more common as yields on Nigerian Eurobonds due July 2023 declined 96 basis points this year through yesterday to a record.

USA: The dollar strengthened to a seven- month high against the yen and government bonds fell as data showed U.S. manufacturing expanded at the fastest pace in three years. Commodities tumbled as oil and gold sank.

The dollar climbed 0.6 percent to 104.99 yen at 10:06 a.m.in New York and gained 0.6 percent to $1.6518 per British pound.

Yields on 10-year Treasury notes increased six basis points to 2.41%.

COMMODITIES: West Texas Intermediate and Brent crude fell amid speculation that weakening manufacturing from Europe to China will cap global oil demand.

The Purchasing Managers’ Index in Europe fell to 50.7 in August from 51.8 in July, London-based Markit Economics said yesterday. China’s manufacturing slowed more than estimated last month. Crude also followed losses in gasoline as the U.S. summer driving season ended.

CHINA: China’s benchmark stock index rose to a 15-month high, led by defence and technology companies, amid speculation the government will increase military spending as part of its efforts to bolster economic growth.

China Space sat Co. and Aerospace Communications Holdings Co. rallied 10%. President Xi Jinping called for more innovation in the country’s armed forces and a new strategy for information warfare.

Macro Economic Indicators
Inflation rate (YoY) for July. 2014                     8.30%
Monetary Policy Rate current                             12.00%
FX Reserves (Bn $) as at August 29th 2014    39.591

Money Market Highlights

O/N                               11.7917
30 Day                          12.5977
90 Day                          13.4663
180 Day                        14.3373
USD 1 Month              0.1565
USD 2 Months            0.1970
USD 3 Months            0.2331
USD 6 Months            0.3296
USD 12 Months          0.5621

Benchmar Yields
Tenor            Maturity       Yield (%)

91d                   04-Dec-14         9.97
182d                 05-Mar-15       10.72
364d                06-Aug-15        11.38
2y                     16-Aug-16         11.15
3y                     31-Aug-17         11.19
5y                     29-Jun-19        11.18

Indicative Currency Exchange Rates
Bid           Offer

USDNGN       161.90          162.90
EURUSD        1.3034         1.3236
GBPUSD        1.6368          1.6570
USDJPY         104.99          105.01
USDCHF        0.9142         0.9244
GBPEUR        1.2437          1.2639
USDZAR        10.6266       10.8294
JPYNGN        1.4904          1.5917
CHFNGN       175.13           176.86
EURNGN       211.81           213.17
GBPNGN       265.79          267.19
ZARNGN        14.19            16.00

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