A Review of the Nigerian Energy Industry

Financial market products & services update

finance01 December 2014, Sweetcrude, Houston – Local and international financial market products and services update.
NIGERIA: The Director General of the Securities and Exchange Commission, SEC, Ms Arunma Oteh, who stated this at the 4th Capital Market Committee retreat held in Abuja said” The bond market has a lot of room for growth with debt-to-GDP ratio at only 11 percent compared to over 200 percent in Japan, 110 percent in Singapore, 103 percent in the United Kingdom, 103 percent in the United States (US) and over 60 percent in China. All round, liquidity needs to improve well beyond its current level. So we want a bond market that will enable us meet the infrastructure deficit estimated at USD3.9 trillion over the next 30 years. We want a market that does more for housing finance, enabling Nigeria close down the 17 million housing unit deficit while supporting entrepreneurship by doing more for SMEs and start-ups.

FX: Few gains achieved last week as the CBN’s bold MPC policies came under test. Efforts by some OPEC members on Thursday to reduce oil production in order to revive falling prices proved futile, leading to further slump in oil price. This had oil price testing 5 year lows by end of week. Resultantly, USDNGN spot resumed under further pressure on Friday, reversing most of the gains earlier in the week, exacerbated by lack of any significant CBN intervention. We had another record low for NGN, with further upside bias going into this week. Market opened at 176.00/ 10 and closed at 178.60/ 70.

FIXED INCOME: Oil price weakness did not deter the hunt for yields in secondary trading even from one or two offshore accounts on Friday. Some pressure seen on bonds but the demand could still be felt amidst the pressure. Tbill short end (30days and below) saw good demand from liquidity managers. Overall, we are 4bps lower on tbills (average yield 13.45%) and 1bp on bonds (average yield 13.41%). Tbill auction this week with the one year paper starting to look attractive again.

COMMODITIES: West Texas Intermediate tumbled below $65 a barrel to the lowest level since July 2009 amid speculation prices have further to drop before OPEC’s decision to maintain output slows U.S. shale supply.

EUROPE: European stocks retreated, after a three-week rally, as a Chinese manufacturing gauge fell more than forecast and American holiday spending slowed. The Stoxx Europe 600 Index lost 0.5 percent to 345.56 at 8:17 a.m. in London. Energy and commodity producers led the losses amid slumping oil prices and after the data on China’s factory output. The Stoxx 600 added 0.6 percent last week, extending its monthly gain to 3.1 percent, the most since February, and hitting a two-month high on Nov. 27. The benchmark gauge rebounded 12 percent from this year’s low on Oct. 16 through Nov. 28 as Mario Draghi said the European Central Bank may broaden its asset-buying program and central banks in Japan and China stepped up measures to support their economies.

CHINA: A Chinese manufacturing gauge fell as factory shutdowns aggravated a pullback in the economy, raising pressure on the central bank to ease policy further after it lowered interest rates for the first time in two years. The government’s Purchasing Managers’ Index fell to an eight-month low of 50.3 in November, compared with the 50.5 median estimate of analysts in a Bloomberg survey and October’s 50.8. Readings above 50 indicate expansion.

Macro Economic Indicators
Inflation rate (YoY) for Oct. 2014                            8.10%
Monetary Policy Rate current                                 13.00%
FX Reserves (Bn $) as at November 27 2014      36.852

Money Market Highlights

O/N                               13.4167
30 Day                          12.4070
90 Day                          13.2600
180 Day                        13.9810
USD 1 Month               0.1540
USD 2 Months             0.2010
USD 3 Months             0.2336
USD 6 Months             0.3262
USD 12 Months           0.5646

Benchmark Yields
Tenor       Maturity      Yield (%)

91d              19-Feb-15       13.45
182d            14-May-15     13.82
364d           03-Sep-15      13.27
2y                16-Aug-16      13.66
3y                27-Apr-17      14.02
5y               29-Jun-19      13.54

Indicative Currency Exchange Rates
Bid       Offer

USDNGN      181.75       182.45
EURUSD       1.2349      1.2551
GBPUSD        1.5559      1.5761
USDJPY        118.41        118.44
USDCHF       0.96085   0.9710
GBPEUR       1.2476      1.2680
USDZAR       10.9934   11.1968
JPYNGN       153.7997  153.9003
CHFNGN      187.95       189.64
EURNGN     226.39       227.75
GBPNGN     284.79       286.19
ZARNGN      15.45         17.37

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