A Review of the Nigerian Energy Industry

Financial market products & services update

Financial markets14 November 2014, Sweetcrude, Lagos – Local and international financial market products and services update.
NIGERIA: Nigerian central bank Governor Godwin Emefiele’s pledge to keep defending the naira was overwhelmed by a drop in oil prices as the currency weakened to another record low against the dollar. “There’s no need for anybody to panic or worry,” Emefiele, 53, said in a phone interview yesterday from Abuja, the capital. “The central bank has always intervened. We know our reserves can support nine months of imports, which is far above the minimum expected. We believe we’re very safe.”

USA: The U.S. Justice Department has given banks about a month to come clean about wrongdoing as it moves closer to wrapping up an investigation into the rigging of currency benchmarks, a person familiar with the probe said. The banks have met with officials in recent weeks to lay out how they see their liability, said the person, who asked not to be identified because the discussions are confidential. Prosecutors have demanded a full accounting of any misconduct by mid-December, the person said.

CHINA: Beijing police raided and shut down more than 10 underground banks that were involved in 140 billion yuan ($23 billion) of transactions over the past few years. The banks were raided on Sept. 18, with 59 people arrested and 264 bank accounts frozen, Beijing Municipal Public Security Bureau said in a statement on its official microblog today. The investigation started in February when Beijing police found that a man with surname Yao had transferred more than $5million abroad in a year, according to the statement. Yao, who had a number of bank accounts, frequently bought $50,000 of foreign exchange, the police said.

FX: USDNGN expectedly gapped at open yesterday following the previous day’s hike in RDAS’ marginal rate by over 50 points, while further dip in Brent crude price sub $80/bbl ensured the pressure on the pair persisted. Market moved from a 169.80 open to the 173 level minutes into the day’s session. CBN had their now customary daily intervention with reiteration on a maximum of 10 points spread by the intervening banks without significantly driving the interbank level lower. Despite the CBN intervention, the market remained predominantly at the 172 level most of the day. The pair closed just shy of the mid 172 level, with pressure still expected to persist.

FIXED INCOME: Very busy day as oil continues to slip lower. Now almost at par with the oil price assumed in Nigeria’s budget (USD77.50 in 2014, USD78 in 2015). Fixed income market was a touch heavy as expected following yesterday’s auction results. Lots of moving parts in Nigeria – Brent, SDF circular to ‘encourage’ lending to the real sector, RDAS circular (NGN having another rough session in today’s trading following the 54 kobo depreciation at the RDAS window on Wednesday), OMO stop rates supported by CBN but demand weaning, weak auction results, higher yields in secondary trading. Mixed signals all point to CBN starting to lose the battle to stem this lack of confidence. We await the MPC meeting 24-25th November.

COMMODITIES: WTI headed for the longest run of weekly declines in almost three decades and Brent was set for a record losing streak amid speculation that OPEC will refrain from cutting production to ease concern of a supply glut. Oil has collapsed into a bear market as leading OPEC members resisted calls to cut production and instead reduced export prices to the U.S., where output has climbed to the highest level in 31 years amid a shale boom.

Macro Economic Indicators
Inflation rate (YoY) for Oct. 2014                       8.10%
Monetary Policy Rate current                             12.00%
FX Reserves (Bn $) as at November 7 2014     37.766

Money Market Highlights

O/N                              10.8583
30 Day                         12.1638
90 Day                         13.2782
180 Day                       14.1219
USD 1 Month             0.1547
USD 2 Months           0.2030
USD 3 Months           0.2321
USD 6 Months           0.3262
USD 12 Months         0.5663

Benchmark yields
Tenor          Maturity       Yield (%)

91d                05-Feb-15         10.73
182d             07-May-15        10.84
364d             03-Sep-15          9.71
2y                  16-Aug-16         12.46
3y                  27-Apr-17          12.98
5y                  29-Jun-19         13.06

Indicative Currency Exchange Rates
Bid         Offer

USDNGN        172.05       172.75
EURUSD        1.2343        1.2545
GBPUSD         1.5577        1.5779
USDJPY         116.32         116.35
USDCHF        0.96105     0.9712
GBPEUR        1.2496        1.2700
USDZAR        11.1338       11.3372
JPYNGN        148.0597    148.1603
CHFNGN      177.47          179.16
EURNGN      213.68         215.05
GBPNGN      268.88         270.27
ZARNGN       14.37           16.30

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