A Review of the Nigerian Energy Industry

Financial market products & services update

26 September 2014, Sweetcrude, Lagos – Local and international financial market products and services update.
FX: USDNGN gapped higher and opened at 163.20/30 yesterday, retracing a chunk of the central bank intervention inspired appreciation from the previous day and progressing to swiftly trade a 163.88 high 5 minutes after open and settling to spend most of the day between 163.48 and 163.62 range. With the absence the central bank’s hand towards close (as we have seen all week), market went bid ensuring a close at the day’s high of 163.80/90. We expect this sentiment to continue today and may trade back above the 164 level with some resistance around 164.50.

Financial markets 1FIXED INCOME: OMO auction was marginally subscribed (NGN70.3bn) at yesterday’s auction. It was a re-tap of same maturity at Monday’s OMO and so street had basically got filled already. Bond market recouped some losses from (- 5bps) yesterday as we saw PFA demand on the long end of the curve. Liquidity in the system at NGN400billion and this gave support to short end of the tbill curve. Saw good demand for the October bills (30day paper). Overnight rates closing at 10.75%. Expect tomorrow to be relatively quiet.

COMMODITIES: Brent crude headed for a third weekly loss this month amid speculation that plentiful oil supplies will buffer the market from unrest in the Middle East.WTI was steady in New York. for November settlement was at $97.01 a barrel on the ICE Futures Europe exchange, up 1 cent, at 3 p.m. Singapore time. The contract gained 5 cents yesterday. The volume of all futures traded was about 48 percent below the 100-day average.

NIGERIA: Nigeria has headed off a threat to its banking industry by propping up struggling power companies with an intervention fund, said analysts. The 213 billion-naira ($1.3 billion) fund announced by President Goodluck Jonathan’s administration on Sept. 19 will be used to pay off gas-supply debts owed by power companies and to cover revenue shortfalls. It will also help them meet debt- service obligations to banks on loans of almost 500 billion naira, on which some were falling behind. “The government is reacting to the risk affecting the power industry as a whole and the sustainability of the reform, which dovetails to the banks,” Yinkere said in a phone interview from the commercial capital, Lagos, on Sept. 24.

US: U.S. sale of $29 billion in seven-year notes attracted above-average foreign demand amid speculation the Federal Reserve will increase interest rates in 2015, while policy makers in Europe and Japan add to monetary stimulus. Benchmark 10-year notes yielded 88 basis points more than G-7 peers after the gap reached 92 on Sept. 17, the widest since June 2007. The dollar gained against 23 of 24 developing-economy currencies tracked by Bloomberg and stocks tumbled.

CHINA: The World Bank Board of Executive Directors has just approved three loans totalling 500 million U.S. dollars for three provinces in China to improve water environmental services in urban and rural areas, said the organization’s China office on Friday. The three provinces are Qinghai and Shaanxi in northwest China and Zhejiang in east China.

Macro economic Indicators
Inflation rate (YoY) for August. 2014                   8.50%
Monetary Policy Rate current                              12.00%
FX Reserves (Bn $) as at September 18 2014   39.595

Money Market Highlights

O/N                              10.9167
30 Day                         12.3712
90 Day                         13.1363
180 Day                       13.9640
USD 1 Month              0.1515
USD 2 Months            0.1995
USD 3 Months            0.2336
USD 6 Months            0.3314
USD 12 Months          0.5822

Benchmark Yields
Tenor         Maturity         Yield (%)

92d               01-Jan-15           11.11
182d             05-Mar-15         10.80
364d             03-Sep-15         12.55
2y                  16-Aug-16         11.61
3y                  31-Aug-17         11.46
5y                  29-Jun-19         11.56

Indicative Currency Exchange Rates
Bid         Offer

USDNGN     162.50        164.50
EURUSD      1.2754        1.2957
GBPUSD      1.6230        1.6432
USDJPY       108.98        109.02
USDCHF      0.9466        0.9468
GBPEUR      1.2610         1.2815
USDZAR      11.0384       11.2401
JPYNGN      150.40         150.51
CHFNGN     173.59         175.22
EURNGN     209.87       211.24
GBPNGN     267.67        267.84
ZARNGN     14.66           14.68

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