A Review of the Nigerian Energy Industry

Financial market products & services update

Financial markets24 November 2014, Sweetcrude, Lagos – Local and international financial market products and services update.
NIGERIA: The fortunes of the national currency, the Naira took a sharp turn downwards yesterday as it fell by 270 kobo, with the parallel market exchange rate rising to N180 per dollar from N177.3 on Monday. Since the beginning of the month, the Naira has fallen against the US dollar by N7.9 at the interbank market, and N10 at the parallel market. Interbank and parallel market operators attributed this sharp depreciation to restrictions introduced by the CBN to curb foreign exchange demand at the official market. Falling crude oil prices, coupled with depleting Excess Crude Account has triggered palpable anxiety about the value of the Naira. Stocks have also been hit as a result.

EUROPE: Spanish government bonds advanced, pushing the 10-year yield below 2 percent for the first time, amid speculation the European Central Bank will buy sovereign debt to stimulate the flagging euro-area economy. Ten-year yields from France to Italy dropped to records as Goldman Sachs Group Inc. said it sees the ECB expanding its asset-purchase program in the first half of next year.

CHINA: China’s central bank said its surprise move to cut interest rates for the first time since 2012 is designed to help small firms and protect depositors instead of all-out monetary easing. How the nation’s lenders respond will determine if it works out that way. The bulk of bank debt in China is still concentrated on big borrowers, with outstanding credit to small firms less than a third of total loans. The People’s Bank of China’s rate cuts came after months of targeted measures failed to lower financing costs for smaller companies.

FX: Spot closed higher yet again today with the recent price action sustained. We moved from a 176.60 at open, testing 177 within minutes, though failing a break initially as CBN supplied decent amount of liquidity again. This initially kept spot sub 177, trading a 176.40 low prior to a late spike in RHS pressure that eventually saw the 177 level broken. The pair traded a 177.55 intraday high and closed at 177.40.

FIXED INCOME: Overnight dropped to 10% on the back of FAAC and OMO maturity. The very short dated T-bills we demanded while there were pockets of demand in the market. Bonds were not left out the 13.05% Aug 2016 dropped over 25bps day on day. Demand all still emerging from locals. MPC next week would be a major highlight and would determine if the yields would race back up or continue to drop.

COMMODITIES: Brent crude rose for a third day amid signs that Iran will seek an output cut at OPEC’s meeting this week and after China unexpectedly reduced interest rates. Brent for January settlement climbed as much as 38 cents to $80.74 a barrel on the London-based ICE Future exchange. The European benchmark crude traded at a premium of $3.94 to WTI.

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     37.549

Money Market Highlights

O/N                                18.2500
30 Day                           15.5304
90 Day                           15.9749
180 Day                         16.8111
USD 1 Month                0.1552
USD 2 Months              0.2045
USD 3 Months              0.2329
USD 6 Months              0.3287
USD 12 Months            0.5643

Benchmark Yields
Tenor      Maturity       Yield (%)

91d             12-Feb-15         12.75
182d          07-May-15        12.85
364d          03-Sep-15         12.80
2y               16-Aug-16         13.80
3y               27-Apr-17         13.85
5y               29-Jun-19        13.65

Indicative Currency Exchange Rates
Bid          Offer

USDNGN          177.55        177.95
EURUSD          1.2400       1.2401
GBPUSD           1.5588       1.5790
USDJPY            117.62        117.65
USDCHF           0.95265    0.9628
GBPEUR           1.2398       1.2602
USDZAR           10.8542     11.0576
JPYNGN           150.0597   150.1603
CHFNGN          183.80       185.48
EURNGN          221.22       222.58
GBPNGN           277.25      278.65
ZARNGN            14.93        16.85

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