A Review of the Nigerian Energy Industry

Financial market products & services update

Financial marketsNIGERIA: Investors’ sell pressure occasioned by national security challenges, decline in international oil prices and political uncertainty impacted negatively on foreign portfolio interest at the Nigeria bourse in September. The Nigerian Stock Exchange (NSE) as saying that in the month under review, total foreign capital outflow from the bourse amounted to N92.54 billion. The capital outflow according to statistics released by the NSE represented an increase of 63.67 per cent when compared with N56.56 billion recorded in August. The growth in sell pressure followed what stakeholders termed foreign portfolio managers anxiety about the Nigerian polity. A further breakdown of the report showed that total foreign inflow during the period under review stood at N134.14 billion compared with N53.86 billion achieved in the preceding month. It also showed that total securities transactions rose by 285.56 per cent to N522.74 billion compared with N135.58 billion posted in August. The exchange said that foreign portfolio investors’ inflow accounted for 25.66 per cent of total transactions, while the outflow accounted for 17.70 per cent of the total transactions.

EUROPE: The European Central Bank plans to clamp down on the complex models lenders use to gauge the risk of their assets, as it works to restore trust in the euro area’s financial system. The ECB, newly installed as the euro area’s single supervisor, plans to scrutinize lenders’ models and eliminate variations across the currency bloc, top policy makers have said. The Frankfurt-based central bank didn’t look at the way banks calculate asset risk in its year-long balance-sheet probe, completed last month. The Basel Committee on Banking Supervision said last week that variations among countries “undermine confidence” in capital ratios, the core measure of financial strength used to score banks in the ECB’s health check.

CHINA: Chinese shares fell after property prices dropped in most mainland cities, while crude oil declined for a second day and Indonesia’s rupian jumped. Japanese stocks rose as Prime Minister Shinzo Abe prepares to call an election delay a tax increase and boost stimulus.

FX: NGN fell further yesterday closing at record 173 level, as the enforcement of capped re-sale margin on intervention funds sold by CB thwarted the apex bank’s attempt in supporting the pair. Most counters stayed off the intervention funds and few that didn’t sold the funds outside the interbank market thus preventing cushioning effect on interbank levels. The pair had gapped from a 171.60 open to touch 172.75, however having some intraday gains as counters started positioning for a now customary daily CB intervention. This pushed levels south to 172.00 -20 range, but with the intervention funds not being sold interbank, we saw a late spike, eventually crossing into the 173 level at close.

FIXED INCOME: Another day for sellers in Fixed Income space. Almost all bids that surfaced in the early period of trading were given. Bond yields inched up an average of 50bps across the curve. Weak demand from local PFAs who have always been the bigger buyers in the local market, and supply from both locals and offshore clients was the order of the day. Bills saw some sell off too, as the yields moved up an average of 25bps. Sept 3rd bill corrected by 143bp to close at 12.90% yield from the very low levels it dropped to previous week.

COMMODITIES: Brent crude fell for a second day as investors weighed the likelihood that OPEC will reduce output when it meets next week amid signs of weakening global demand. Brent for January settlement fell as much as 46 cents to $78.85 a barrel on the London-based ICE Futures Europe exchange and was at $79.03 at 4:06

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              0.1540
USD 2 Months           0.2035
USD 3 Months           0.2319
USD 6 Months           0.3256
USD 12 Months         0.5611

Benchmark yields
Tenor        Maturity       Yield (%)

91d               12-Feb-15         10.45
182d            07-May-15        11.39
364d           03-Sep-15          11.51
2y                16-Aug-16          12.98
3y                27-Apr-17          13.28
5y                29-Jun-19          13.32

Indicative Currency Exchange Rates
Bid         Offer

USDNGN       172.10        172.80
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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