A Review of the Nigerian Energy Industry

Financial market products & services update

Financial markets 112 September 2014, Sweetcrude, Lagos – Local and international financial market products and services update.
FX: Further pressure on the local unit yesterday, breaking the 163.00 resistance early into the day’s trading session and hitting 9 weeks 163.26 high intraday, despite emergence of some sellers at the 163 level. A late boost in USD liquidity suspected to be a CBN intervention had the pair trading around the opening level towards close, leaving the NGN to close unchanged at 162.75/85 for the 3rd consecutive day. Recent increase in market’s appetite for USD, mostly banks meeting demand from the BDC segment, as well as a probable reaction to the continuous dip in Brent Crude price (traded $96.75/bbl low today) give credence to a short term upside bias for the pair.

FIXED INCOME: OMO auction yesterday with NGN239billion sold on 29 Jan 2014 at 11.27% yield. Secondary market was fairly well behaved with a bit of sell-off in bonds at open and some (but not all) of the losses recouped before close of trading as Brent touched 96 levels but 98.15 now as I type. Market closed about 5bps up to close at 11.85% yield average on bonds.

COMMODITIES: West Texas Intermediate and Brent headed for a second weekly drop amid signs that crude supply will continue to rise even as global demand weakens. Brent closed below $100 a barrel for a third time yesterday as the International Energy Agency cut its global oil demand forecasts and OPEC trimmed its output target. The U.S. will join the European Union in stiffening sanctions on Russia over Ukraine.

NIGERIA: Nigeria’s proposed wholesale Development Finance Institution (DFI) is to take off in 6 to 9 months with up to $5 billion seed capital to be sourced through a combination of debt and equity. Discussions are still ongoing on the entire funding sources and structure, but it was reliably gathered that while the Nigerian government takes a major participation, the World Bank, African Development Bank (AfDB), German and French governments have made over 1$ billion initial funding commitments already.

EU: The euro fell to the lowest level in 11 weeks versus the dollar and yen after European Central Bank Vice President Vitor Constancio said policy makers are prepared to add further monetary stimulus if needed. The 18-nation currency dropped versus most of its 16 major peers after a report showed growth in the euro-area fell short of analyst estimates last quarter. ECB President Mario Draghi said last week policy makers would be comfortable adding stimulus in June. Switzerland’s franc dropped to a three-month low versus the dollar as producer prices in the nation fell more last month than economists forecast.

INDIA: India’s rupee headed for the biggest weekly drop in six on concern an improving U.S. economy will spur the Federal Reserve to raise interest rates sooner than planned, reducing the allure of emerging-market assets. Fed officials led by Chair Janet Yellen next meet Sept. 16-17. The dollar has rallied in the past four weeks as U.S. economic reports boosted speculation the central bank will act on borrowing costs sooner than estimated while continuing to pare its record bond purchases. India will release data on consumer prices and industrial production later today.

Macro Economic Indicators
Inflation rate (YoY) for July. 2014                       8.30%
Monetary Policy Rate current                              12.00%
FX Reserves (Bn $) as at September 5 2014     39.637

Money Market Highlights

O/N                              10.9167
30 Day                         12.3266
90 Day                         13.3355
180 Day                       14.1147
USD 1 Month              0.1536
USD 2 Months            0.1950
USD 3 Months            0.2341
USD 6 Months            0.3309
USD 12 Months          0.5822

Benchmark Yields
Tenor         Maturity           Yield (%)

91d                11-Dec-14             11.00
182d              05-Mar-15           10.89
364d              03-Sep-15            11.21
2y                   16-Aug-16            11.43
3y                   31-Aug-17            11.46
5y                   29-Jun-19            11.56

Indicative Currency Exchange Rates
Bid         Offer

USDNGN        162.40         163.10
EURUSD         1.2824        1.3026
GBPUSD          1.6148        1.6350
USDJPY           107.13         107.15
USDCHF          0.9306       0.9408
GBPEUR          1.2470        1.2672
USDZAR          10.8958     11.0987
JPYNGN          151.8794    151.9806
CHFNGN         173.10         174.82
EURNGN         209.70       211.08
GBPNGN         263.76        265.17
ZARNGN          13.89          15.71

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