A Review of the Nigerian Energy Industry

Financial market products & services update

Financial markets 117 November 2014, Sweetcrude, Lagos – Local and international financial market produc ts and services update.
NIGERIA: Nigeria is planning spending cutbacks as falling oil prices eat into the country’s revenue, Finance Minister Ngozi Okonjo-Iweala said. For budgetary purposes, the minister is proposing an oil price benchmark of $73 per barrel in 2015, down from $77.5 per barrel this year, she told reporters in Abuja, the capital. Nigeria, which relies on oil sales for 70 percent of government revenue, expects to produce 2.27 million barrels per day next year, generating revenue of 6.833 trillion naira ($39.8 billion), the minister said. This year’s budget was based on output of 2.39 million barrels a day. To attempt to make up for weaker oil income, the government, which is heading into an election year, wants to bring in a greater tax take. As part of this drive, the minister said, officials are drawing up a list of luxury goods on which surcharges may be levied, naming champagne, jet aircraft and high-performance cars as possible targets. Printing additional naira is not an option, she said, and Nigeria would not seek to borrow heavily domestically.

FX: More active CBN presence on Friday ensured spot printed about 1 big figure lower than the previous close. The pair opened yet again at the 173 levels after brent crude price tested new lows, but we saw a brief correction to the 172 level within moments of recording 173.70 intraday high. With CBN’s intervention starting earlier than usual, we saw a consistent intraday appreciation, buoyed by CBN’s funds hitting market between the 167.60-170.10 range. Spot closed for the week at 171.25/35, with some breather for brent crude price late Friday, however still very much sub $80/bbl.

FIXED INCOME: Bids on many papers continued to be brutal including tbills. Dealers were quick to offload risk especially OMO bills and only a handful of prices around on screens. Very active last week here with all bonds excluding August 2016s now sitting pretty above 13.10% yield. 03 sep bill was badly beaten up again on Friday (closing +176bps). Average yield on bills 10.82% and bonds 13.02%. Liquidity opened at NGN194.5billion with O/N rates closing at 10.75%

COMMODITIES: West Texas Intermediate resumed its decline after the biggest gain in almost two months as investors weighed the likelihood that OPEC will cut output when the group meets this month. Brent fell in London. Brent for January settlement fell as much as $1.18 to $78.23 a barrel on the London-based ICE Futures Europe exchange.

EUROPE: Mario Draghi will succeed in boosting the European Central Bank’s balance sheet back toward 3 trillion euros ($3.75 trillion), though he’ll have to override some policy makers’ qualms on quantitative easing to do so. Draghi, who has faced opposition to his most-recent measures, addresses the European Parliament in Brussels today. He’ll probably reiterate his pledge to be ready with further steps should the outlook for the economy worsen, and 95 percent of respondents in the survey said he’ll act on that promise either this year or in 2015.

CHINA: China’s bad loans jumped by the most since 2005 in the third quarter, fueling concern that a cooling economy will be further weakened as banks limit lending to avoid credit risks. Nonperforming loans rose 72.5 billion yuan ($11.8 billion) from the previous quarter to 766.9 billion yuan, the China Banking Regulatory Commission said in a statement on Nov. 15. Soured credit accounted for 1.16 percent of lending, up from 1.08 percent three months earlier.

Macro Economic Indicators
Inflation rate (YoY) for Oct. 2014                       8.10%
Monetary Policy Rate current                             12.00%
FX Reserves (Bn $) as at November 13 2014   37.596

Money Market Highlights

O/N                                10.9167
30 Day                           12.2954
90 Day                           13.2929
180 Day                         14.2995
USD 1 Month                 0.1530
USD 2 Months               0.2030
USD 3 Months               0.2321
USD 6 Months               0.3264
USD 12 Months             0.5633

Benchmark Yields
Tenor        Maturity       Yield (%)

91d              12-Feb-15            10.41
182d            07-May-15          11.34
364d            03-Sep-15           11.47
2y                 16-Aug-16           12.98
3y                 27-Apr-17            13.26
5y                 29-Jun-19           13.30

Indicative Currency Exchange Rates
Bid       Offer

USDNGN          172.00       172.70
EURUSD           1.2424       1.2626
GBPUSD           1.5564        1.5766
USDJPY            116.04        116.07
USDCHF           0.95405     0.9642
GBPEUR           1.2405        1.2609
USDZAR          10.9911        11.1945
JPYNGN          147.4597      147.5603
CHFNGN          177.65         179.34
EURNGN         214.90         216.26
GBPNGN          267.49         268.88
ZARNGN            14.47            16.40

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