A Review of the Nigerian Energy Industry

Financial market products & services update

Financial markets 125 November 2014, Sweetcrude, Lagos – Local and international financial market products and services update.
NIGERIA: The continued high demand for dollar at the nation’s foreign exchange markets due to the global fall in oil prices forced the Central Bank of Nigeria to sell dollar at a record price of N162 on Monday, investigation by our correspondent revealed. The development made it the first time the CBN was selling the dollar outside its official rate band of N150 to N160. For eight months at its twice-weekly official market called Retail Dutch Auction System, the CBN had sold the dollar for around N155 before moving it later to N156. However, falling oil prices causing pressure on the naira in recent times had forced the central bank to start selling the dollar for N158. At last Wednesday’s RDAS window, the CBN sold the dollar for N158.41. On Monday, however, the market was surprised when the central bank came with a shocker and sold the dollars to forex dealers for N162 per dollar.

EUROPE: Germany relied on domestic consumers for economic growth last quarter as investment fell, putting the strength of the nation’s recovery at risk. A near-stagnant euro-area economy and political tension with Russia is curbing German companies’ willingness to invest, potentially undermining growth prospects both at home and in the currency bloc as a whole. The German government has resisted calls to ramp up its own spending as it aims to balance its budget next year, and has put off a 10 billion euro ($12.4 billion) boost in investment until 2016.

FX: We had another steep increase in RDAS marginal rate at yesterday’s auction by over 4 big figures to 164.1250; CBN sold $ 198m of the $200m on offer. This is likely to invite more pressure at open tomorrow as the consistent depreciation of the RDAS rate might culminate in a shift in the official band (155+/3%) at tomorrow’s MPC meeting. We are likely to see most of the gains achieved in the interbank market today as the presence of 2 oil majors selling over $200m as well as significant CBN intervention helped see over 4 big figures intraday appreciation. The pair had weakened to yet a new record high of 178.05 intraday high before news of the oil flows pushed rates south, while CBN’s intervention ensured the gains were sustained. The pair traded a 173.10 low, and closed a tad higher.

FIXED INCOME: The tone in the market continues to be very weak with limited appetite for Nigeria risk from international accounts (and PFAs on the sideline yesterday). Average yields not yet at the wides for the year but we are approaching gradually. Street shorts pulling the July 2034s lower. MPC outcome today with the whole world waiting and watching.

COMMODITIES: Brent for January settlement declined as much as 57 cents to $79.11 a barrel on the ICE Futures Europe exchange and was at $79.17 at 8:18 a.m. London time. The contract slid 68 cents to $79.68 yesterday. The European benchmark crude traded at a premium of $3.63 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     37.596

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          12.75
182d           07-May-15         12.85
364d           03-Sep-15          11.80
2y               16-Aug-16           13.80
3y               27-Apr-17            13.85
5y               29-Jun-19           13.66

Indicative Currency Exchange Rates
                           Bid       Offer
USDNGN        176.05     176.75
EURUSD        1.2336      1.2539
GBPUSD        1.5585      1.5786
USDJPY         118.10      118.16
USDCHF        0.9615     0.9714
GBPEUR        1.2505      1.2709
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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