A Review of the Nigerian Energy Industry

Financial market products & services update

14 October 2014, Sweetcrude, Lagos – Local and international financial products markets and services update.
FX: Respite for USDNGN yesterday with about 1 big figure intraday appreciation seen on the back of nearly $400mio inflow from the state owned Oil Company as well as an international oil major. This was enough to force a selloff, seeing the pair move from the mid 164 level at open to give NGN a sub 164 close, first time we’re seeing a significant appreciation without any CBN intervention in weeks. We’re likely to see some of the gains reversed today, though lesser volatility is expected.

Financial markets 1FIXED INCOME: NGN71.741bn was sold at yesterday’s OMO auction. This came was at 11% discount (+10bps from last auction on Thursday) (11.57% yield). Market already priced in a shift in the OMO auction stop rate and we still expect some pressure on the OMO stop rate to shift higher. Activity in the bonds space was relatively muted ahead of the auction on Wednesday with slight demand yesterday for the January 2022s. Short dated paper 0 – 2mths remains the instrument of choice to hold by the market. Market liquidity was up NGN470billion with overnight rates remaining unchanged at 10%.

COMMODITIES: WTI extended its route from the lowest price in 22 months amid speculation that rising U.S. stockpiles are exacerbating a global glut that’s driven prices into a bear market. WTI slid as much as 91cents to $84.83 a barrel Brent also fell as much as 81cents to $88.08 a barrel on the London-based ICE futures Europe exchange.

NIGERIA: The total federally-collected revenue in the second quarter of 2014 stood at N2.602 trillion, according to a report by the Central Bank of Nigeria (CBN). The central bank’s economic report for the second quarter of 2014, obtained monday, showed that the amount represents an increase of 4.3 per cent above the level in the preceding quarter. It, however, declined by the same margin when compared with the proportionate quarterly budget estimate. The development relative to the quarterly budget estimate was attributed to the fall in non-oil revenue.

EU: European Central Bank President Mario Draghi’s pledge to do “whatever it takes” with a bond-buying plan to save the euro-area goes on trial before the European Union’s top judges today. The Court of Justice, the bloc’s highest court, will weigh whether Draghi’s ECB overstepped its powers in 2012 with the mechanism to buy the debt of stressed countries if needed.

CHINA: China’s benchmark stock index fell for a third day, the longest losing streak in two months, amid concern slowing global economic growth will hurt the outlook for the nation’s exports. The Shanghai Composite Index fell 0.3 percent to 2,357.91 at 2:12 p.m., reversing a gain of as much as 0.6 percent. The International Monetary Fund cut its forecast for global growth last week and said the euro area faces the risk of a recession. China’s exports increased 15.3 percent from a year earlier, the biggest increase since February 2013 and beating the 12 percent median estimate in a Bloomberg survey of analysts, according to government data released yesterday. Hong Kong unexpectedly overtook the U.S. in September as the top destination for Chinese shipments.

Macro Economic Indicators
Inflation rate (YoY) for August. 2014            8.50%
Monetary Policy Rate current                         12.00%
FX Reserves (Bn $) as at October 10 2014   39.550

Money Market Highlights

O/N                              10.6917
30 Day                         12.7078
90 Day                         13.4613
180 Day                       14.3059
USD 1 Month             0.1533
USD 2 Months           0.1950
USD 3 Months           0.2306
USD 6 Months           0.3211
USD 12 Months         0.5473

Benchmark Yields
Tenor       Maturity        Yield (%)

91d              08-Jan-15         11.10
182d           09-Apr-15          11.52
364d          03-Sep-15           11.90
2y               16-Aug-16           12.43
3y               31-Aug-17           12.58
5y               29-Jun-19          12.64

Indicative Currency Exchange Rates
Bid          Offer

USDNGN         163.70         164.40
EURUSD          1.2585         1.2787
GBPUSD          1.5928         1.6130
USDJPY           107.20         107.27
USDCHF          0.94695      0.9571
GBPEUR          1.2532         1.2736
USDZAR         10.9802       11.1836
JPYNGN         152.7297      152.8303
CHFNGN         171.20          172.89
EURNGN        207.39          208.75
GBPNGN         261.78          263.18
ZARNGN           13.82           15.74

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