A Review of the Nigerian Energy Industry

Financial market products & services update

Financial markets04 November 2014, Sweetcrude, Lagos – Local and international financial market products and services update.
FX: Spite in activities in market today with news of an oil major in the market stirring a slight sell off at open, the pair traded a 165.45 intraday low on the back of that after opening about 20 points higher. We failed a break below 165.45 as market was bid thereafter, eventually testing the 166 resistance level, but failing a complete break through and closed at 165.68/78. CBN offered $500 million at yesterday’s RDAS, selling $498.95 million with marginal rate maintained at 155.76 (1% commission excluded).

FIXED INCOME: On Friday, AMCON redeemed the outstanding value of its bonds with non-CBN holders (mostly banks) to the tune of NGN867bn ($5.3bn), swapping the bonds for a combination of Tbills and cash (70:30). Effectively, NGN260bn/ $1.6bn hit the system today and CBN issued NGN90.87bn (35%) worth of 178day paper today via open market operations at 11.62% yield. Tbills exchanged were maturities across the curve so in general, Tbill market was weaker yesterday. 5 Feb 15 and 7 may 15 Tbill (-23bps) were outliers – as they are on offer at Wednesday’s auction. Bonds were also weaker.

COMMODITIES: Brent for December settlement advanced 28 cents, or 0.3 percent, to $86.14 a barrel on the London-based ICE Futures Europe exchange

NIGERIA: Increased liquidity is expected to boost demand for Nigerian local debt next week after state-backed rescue bank Assets Management Company (AMCON) retired about 867 billion naira ($5.24 billion) worth of bonds on Friday. Yields on the benchmark 10-year bond fell this week after local pensions increased demand for bonds. Local pensions are expected to play a big role in the market, with most offshore investors remaining on the sidelines due to falling global oil prices and a decline in the value of the naira currency. “We see an increase in demand from local pensions and other assets managers on account of the huge liquidity in the market arising from the retirement of matured AMCON bond,” one dealer said. The naira has been under pressure over the past five weeks because of weaker oil prices.

CHINA: China plans a $16.3 billion fund to finance construction of infrastructure linking domestic and overseas markets as President Xi Jinping pushes forward with his plans to revive the centuries old Silk Road trading route. The money will be used to build and expand railways, roads and pipelines in Chinese provinces that are part of the strategy to facilitate trade over land and shipping routes, according to government officials who participated in drafting the plan. The fund will mainly be overseen by China’s policy banks

EU: Low inflation, flagging growth, and the European Central Bank’s stimulus bias will probably force eastern members of the European Union to cut interest rates to record lows this week. Reduced borrowing costs will be cemented in three monetary policy decisions on consecutive days before the outcome of the ECB’s deliberations on Nov. 6, economists predict. They forecast Romania and Poland will reduce rates today and tomorrow, while Czech officials will maintain their own benchmark close to zero a day later as they ponder their stance on stemming gains in the koruna.

Macro Economic Indicators
Inflation rate (YoY) for Sept. 2014                    8.30%
Monetary Policy Rate current                            12.00%
FX Reserves (Bn $) as at October 24 2014     39.002

Money Market Highlights

O/N                               10.7100
30 Day                          12.5670
90 Day                          13.2579
180 Day                        14.2501
USD 1 Month              0.1525
USD 2 Months            0.1975
USD 3 Months           0.2326
USD 6 Months           0.3227
USD 12 Months         0.5418

Benchmark yields
Tenor       Maturity       Yield (%)

91d             22-Jan-15         11.11
182d          23-Apr-15         11.29
364d         03-Sep-15          11.59
2y              16-Aug-16         12.25
3y              27-Apr-17         12.54
5y              29-Jun-19        12.64

Indicative Currency Exchange Rates
Bid         Offer

USDNGN       165.10       165.80
EURUSD        1.2510      1.2512
GBPUSD        1.600        1.6002
USDJPY         113.69       113.72
USDCHF        0.9635      0.9645
GBPEUR        1.2790       1.2792
USDZAR        11.0340     11.0375
JPYNGN        145.7397   145.8403
CHFNGN       172.88      174.57
EURNGN      207.81      209.17
GBPNGN      265.91       266.30
ZARNGN       15.03        15.96

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