A Review of the Nigerian Energy Industry

Financial market products & services update

Financial markets05 November 2014, Sweetcrude, Lagos – Local and international financial market products and services update.
FX: Further oil price dip, hitting sub $83/bbl today as well as continuation of the sell-off in the equity market that had the ASI hit year to date low of 36.7k points intraday, down 1.61% yesterday ensured further pressure on the pair, eventually breaking through 166 level. The pair traded its weakest level in 8 months, hitting 166.45 intraday high from a 165.75/85 open. Last minutes CB intervention for the first time in about 2 weeks helped ease the pressure slightly; however, this was unable to push the pair lower than 165.78, closing a tad higher at 165.80/90 which is the highest close year to date.

FIXED INCOME: Weak tone and 10bps wider in bonds driven by oil weakness ($82 handle), All Share Index weakness (sub 37k) and FX weakness. Tbills saw some selective buying but overall a slight cloud of weakness can still be felt hanging over the Tbill market. Tbill supply from the primary auction tomorrow and the spread (105bps) between the 182day and 1year cut-offs seen at the last auction should tighten due to the existing liquidity in the system. Most of the demand will be in the one year paper which looks attractive from a liquidity management perspective.

COMMODITIES: WTI extended losses from the lowest price in three years as forecasts for a gain in U.S. crude stockpiles bolstered speculation that rising supply is outpacing demand growth. Brent fell to $82 a barrel.

NIGERIA: Stocks in Nigeria dropped for a ninth day to their lowest level in more than a year, joining a selloff in oil-exporting nations’ shares as the price of the commodity retreated. The Nigerian Stock Exchange All-Share Index fell 1.6 percent to 36,744.46, the lowest since September 2013, by the close in Lagos, the commercial capital. Shares in Organization of the Petroleum Exporting Countries, including Kuwait and Indonesia, fell as WTI and Brent declined. Nigeria, which produced about 2.1 million barrels of oil a day in October, is facing renewed pressure on its currency as falling crude prices erode the West African nation’s foreign- exchange reserves. The naira weakened 0.1 percent to 165.95 per dollar after earlier falling as much as 0.7 percent.

CHINA: China’s stocks fell for the first time in seven days as construction and transport companies slid on concern recent gains were excessive and after a private report showed expansion in the nation’s service industry slowed. The Shanghai Composite Index lost 0.5 percent to 2,419.25 at the close. China plans a $16.3 billion fund to finance construction of infrastructure linking its markets to three continents as President Xi Jinping pushes forward with his plans to revive the centuries-old Silk Road trading route.

EU: European Union policy makers have come up with a big new idea to drive investment and economic growth by building a “capital markets union.” Now they have to figure out what that means. Jean-Claude Juncker, president of the new European Commission, issued the call back in July, telling EU lawmakers that developing and integrating capital markets “would cut the cost of raising capital, particularly for small and medium-size enterprises.” It would also “help reduce our very high dependence on bank funding,” he said. Since then, everyone from the European Central Bank to lenders and exchanges has come forward to fill Juncker’s slogan with content.

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                               10.5000
30 Day                          12.3320
90 Day                          13.2839
180 Day                        14.4293
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         11.00
182d           23-Apr-15         11.29
364d          03-Sep-15          11.69
2y               16-Aug-16          12.30
3y               27-Apr-17          12.57
5y               29-Jun-19         12.64

Indicative Currency Exchange Rates
Bid        Offer

USDNGN         165.50        166.20
EURUSD          1.2260       1.2761
GBPUSD          1.5704        1.6205
USDJPY           112.48        116.47
USDCHF         0.9177        0.9845
GBPEUR         1.2790        1.2792
USDZAR         10.4774      11.7775
JPYNGN         1.4197         1.4986
CHFNGN        163.88        173.57
EURNGN        207.81        209.17
GBPNGN        261.91         269.30
ZARNGN         15.03          15.96

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