A Review of the Nigerian Energy Industry

Financial market products & services update

17 October 2014, Sweetcrude, Lagos – Local and international financial market products and services update.
FX: USDNGN broke through the 165 level at close yesterday, as the pressure on NGN persists. The pair had remained relatively stable for most part of the day, with spot initially resisting 164.85 despite some level of demand in the market; indication that counters were taking positions ahead of a probable late CBN intervention. This failed to materialise and late covering of positions spooked market in the last few minutes of trading pushing spot to a 165.50 high intraday (NGN’s weakest level since March) and closing few points lower at 165.15/25

Financial markets 1FIXED INCOME: Significant volatility today in the bond markets following the auction results. Another day of prices hugely dislocated in the bond markets. Lots of one-way prices and bid/offer spreads outside of the standard (mandatory spread of 25bps required by SRO irrespective of market conditions). Sellers dominated yesterday from the open and definitely makes up about 70% of trades. We saw some buying come back by midday but the sell-off we witnessed this morning has pushed yields out to recent high levels (13% handle traded). Market traded actively and at the top of the list was the April 2017s. Fixed income market particularly bonds remains very fragile. Tbills still lagging behind bonds, only a matter of time before we seem those plays catch up. Although we note that a number of bonds starting to appear relatively attractive at the current levels, we do not expect this to spur any major form of immediate demand as investors remain cautious amidst the oil price pressure

COMMODITIES: Brent crude climbed from the lowest level in almost four years on speculation prices decreased more than justified. West Texas Intermediate rebounded after falling below $80 for the first time since June 2012. Futures advanced as much as 1.2 percent in London after falling below $83 for the first time since November 2010.

NIGERIA: With the potential to earn at least $7 billion yearly from its tourist markets, stakeholders in the tourism industry have emphasized the need for sustainable partnerships and linkages to harness the opportunities in the industry. Specifically, Nigeria’s tourist markets hold a $4 billion domestic market and a $3 billion diaspora market yet to be maximally explored for growth. According to the Nigeria Tourism Development Corporation (NTDC), the domestic tourism market has a very high revenue and job creation potential but remains under explored, as Nigerians’ preference for foreign tourism takes toll on the sector.

USA: The U.S. budget deficit fell by nearly a third to $483 billion in fiscal 2014, the lowest level since 2008, as a quickening economic recovery boosted tax collections and spending grew only modestly, the Treasury Department said. The deficit, down from $680 billion last year, was the lowest since a $459 billion budget gap in fiscal 2008, which was followed by four straight years of $1 trillion-plus deficits in the wake of the financial crisis.

CHINA: China’s stocks fell, erasing earlier gains, on speculation a much-anticipated trading link between Hong Kong and Shanghai will be delayed. There isn’t a timetable for the link and any announcement about when it will begin should be made jointly by regulators, Hong Kong Exchanges & Clearing Ltd. Chief Executive Officer Charles Li told reporters today. The China Securities & Regulatory Commission may announce the start date at a regular press briefing yesterday.

Macro Economic Indicators
Inflation rate (YoY) for August. 2014               8.50%
Monetary Policy Rate current                            12.00%
FX Reserves (Bn $) as at October 13 2014      39.536

Money Market Highlights

O/N                                   10.7917
30 Day                              12.9218
90 Day                              13.5650
180 Day                             14.3931
USD 1 Month                   0.1570
USD 2 Months                 0.1963
USD 3 Months                 0.2307
USD 6 Months                 0.3231
USD 12 Months               0.5465

Benchmark yields
Tenor          Maturity          Yield (%)

91d                 08-Jan-15             11.13
182d              09-Apr-15             11.78
364d              03-Sep-15             11.88
2y                   16-Aug-16             12.74
3y                   31-Aug-17             12.74
5y                   29-Jun-19             12.86

Indicative Currency Exchange rates
Bid        Offer

USDNGN          164.25      164.95
EURUSD           1.2697      1.2899
GBPUSD           1.5890      1.6092
USDJPY            105.92      105.95
USDCHF           0.93765   0.9478
GBPEUR           1.2393      1.2597
USDZAR           10.9757    11.1791
JPYNGN           154.9197  155.0203
CHFNGN          173.76      175.45
EURNGN          209.95     211.31
GBPNGN          262.28     263.67
ZARNGN            13.88       15.80

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