A Review of the Nigerian Energy Industry

Financial market products & services update

Financial markets 130 October 2014, Sweetcrude, Lagos – Local and international financial market products and services update.
NIGERIA: As part of measures to strengthen the naira as well as to sanitise the operations of the forex market, the Central Bank of Nigeria (CBN) has barred commercial banks (authorised dealers) from selling its interventions funds in the interbank market to authorised buyers such as Bureaux de Change and hotels. The central bank stated this in a circular dated October 28, 2014 obtained yesterday. The CBN also directed that funds purchased through its interventions at the interbank market should be utilised within two working days of delivery, at a rate not more than 10 kobo above the purchase rate.

The CBN circular also directed that unutilised funds within two days of delivery should be returned to the Bank at the original purchase rates.

FX: 2 oil companies were in the market yesterday, however this failed to hold the pair, which opened at 165.45/55. Thereafter, news of the newly released CBN circular regarding utilization of intervention funds which aim to cap the spread on interbank funds as well as prevent sale of intervention funds to parallel market dealers left market assured of another round of a decisive intervention later in the day’s session. Absence of a CB intervention had rates inch up higher in that last 30 minutes, however resisting a move above 165.55 this time, closing at 165.35/45.

FIXED INCOME: T-bill market was very quiet yesterday with only a handful of trades going through. There was very little movement for most of the day. There was another OMO auction with bid cover down to 1.08 compared to 1.21 from Tuesday’s auction. There was improved appetite in bonds especially on the August 2016s closing 10bps lower from yesterday. Improved appetite for bonds could be associated with the liquidity that will follow the maturing AMCON bonds on Friday. We expect to see more of the demand on the short end of the bond curve again today.

USA: A robust pace of business spending likely buoyed U.S. economic growth in the third quarter, a sign corporate chieftains have confidence in the sustainability of the recovery. Gross domestic product likely grew at a 3.0 percent annual pace, according to reports, with housing, trade, government and consumers also lending support. While that would be a step down from the second quarter’s brisk 4.6 percent pace, it would be the fourth quarter out of five that the economy has expanded at or above a 3 percent clip.

COMMODITIES: West Texas Intermediate crude climbed to the highest level in a week amid speculation that U.S. fuel demand is increasing and the Federal Reserve may signal that interest rates will stay low. WTI for December delivery rose as much as $1.30 to $82.72 a barrel in electronic trading on the New York Mercantile Exchange, the highest since Oct. 22.

CHINA: China posted a current account surplus of $81.5 billion and an $81.6 billion deficit on its capital and financial account in the third quarter of 2014, preliminary data from the foreign exchange regulator showed on Thursday. The figures, published by the State Administration of Foreign Exchange(SAFE), are subject to revisions.

Macro Economic Indicators
Inflation rate (YoY) for Sept. 2014                      8.30%
Monetary Policy Rate current                             12.00%
FX Reserves (Bn $) as at October 27 2014       38.863

Money Market Highlights

O/N                                  10.5767
30 Day                             12.2694
90 Day                             13.1249
180 Day                           14.0491
USD 1 Month                 0.1535
USD 2 Months               0.1975
USD 3 Months               0.2326
USD 6 Months               0.3239
USD 12 Months             0.5416

Benchmark Yields
Tenor            Maturity         Yield (%)

91d                   22-Jan-15            9.98
182d                23-Apr-15          10.84
364d               03-Sep-15           11.58
2y                    16-Aug-16           12.32
3y                    27-Apr-17           12.55
5y                    29-Jun-19          12.71

Indicative Currency Exchange Rates
Bid          Offer

USDNGN       165.08         165.78
EURUSD        1.2486         1.2688
GBPUSD        1.5891          1.6093
USDJPY         109.03         109.06
USDCHF        0.95275      0.9629
GBPEUR        1.2603         1.2807
USDZAR      10.8553         11.0587
JPYNGN       1.4668           1.5675
CHFNGN      157.60           159.29
EURNGN      207.55           208.91
GBPNGN      263.86           265.25
ZARNGN        14.14              16.06

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