A Review of the Nigerian Energy Industry

Financial market products & services update

Forex trading10 November 2014, Sweetcrude, Lagos – Local and international financial market products and services update.
NIGERIA: Nigeria has attracted $59 billion pipeline local and foreign direct investments into the different sectors of the economy within 3yrs, the Minister of Industry, Trade and Investment, Mr Olusegun Aganga said at the weekend. He noted the far-reaching industrial policies in line with the Transformation Agenda of President Goodluck Jonathan had helped to make the country a destination of choice for investment and also diversify the nation’s economic base.

EU: Mario Draghi is seeking economists who understand banks, and he’s not afraid to look outside Frankfurt to find them. As the European Central Bank assumes the mantle of euro-area financial supervisor, its president has just staffed two key monetary-policy posts with non-ECB experts on how lenders function in the economy. The appointments mark a trend of turning to outsiders as the 16-year-old institution struggles to meet its changing responsibilities with existing staff.

CHINA: The yuan strengthened after China’s trade surplus approached a record and the central bank raised its reference rate by the most since the end of a de-facto peg to the greenback in 2010. The currency was boosted also by the announcement that a Shanghai-Hong Kong stock exchange link will start on Nov. 17. The People’s Bank of China raised the yuan’s daily fixing by 0.37 percent to 6.1377 per dollar. Exports rose more than estimated in October, helping push the trade surplus to the third-highest on record.

FX: USDNGN dropped to an all time record low last week to touch 173.00; exacerbated by large offshore exits from the equity markets (recording a 11.50% decline from week’s open); continued downward pressure on oil prices; and even more market’s diminished confidence in the Central bank’s ability or willingness to keep the currency in check. We saw the big move (167 break) on Thursday, shortly after the Central bank introduced two new policies. On Friday, Just when the market had given up the central bank, we saw the Central bank’s hand aggressively push USDNGN into a ‘comfortable range’ closing at 165.75, as well as reiterating its commitment on the wires.

FIXED INCOME: Busy day courtesy of the events on thursday. Tbills market was quite illiquid but bond market a bit better though volatile. Everyone was waiting for the OMO auction results which came out after trading hours with stop rate largely unchanged – 1bps to 10.99% discount (11.57% yield) – NGN288.95 billion sold. We expect yields today to graduate to levels before the circular came out (average yield of 11.08% tbills and 12.65% – bonds).

COMMODITIES: Brent crude rose for the third time in four days as Chinese export data signaled foreign demand may help sustain the economy in the world’s second-biggest oil consumer. Brent rose as much as 56cents to $83.95/bbl. Prices slid for a 7th week through Nov 7, the longest run of declines since November 2001, and are 24% lower this year.

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       38.160

Money Market Highlights

O/N                              9.8750
30 Day                         11.9145
90 Day                         13.0211
180 Day                       13.9794
USD 1 Month             0.1220
USD 2 Months           0.1573
USD 3 Months           0.2326
USD 6 Months           0.3267
USD 12 Months         0.5663

Benchmark Yields
Tenor     Maturity      Yield (%)

91d           05-Feb-15       10.82
182d        07-May-15       12.65
364d        03-Sep-15       12.30
2y             16-Aug-16       13.32
4y             27-Apr-17       13.16
5y             29-Jun-19       13.16

Indicative Currency Exchange Rates
Bid        Offer

USDNGN       166.13     166.83
EURUSD       1.2373     1.2575
GBPUSD       1.5806     1.6008
USDJPY        114.05      114.08
USDCHF      0.95915    0.9693
GBPEUR      1.2651       1.2855
USDZAR      11.1273     11.3307
JPYNGN      145.4297  145.5303
CHFNGN     171.37       173.06
EURNGN    206.44      207.80
GBPNGN    263.46       264.85
ZARNGN     13.89          15.82

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