A Review of the Nigerian Energy Industry

Financial market products & services update

finance02 November 2014, Sweetcrude, Houston – Local and international financial market products and services update.
NIGERIA: Food Retailers are flocking to Nigeria because of its large and young population with rising income and a lack of modern supermarkets. Shoprite and Massmart have each opened stores, while Carrefour, through its joint venture with CFAO, and Pick’N’Pay are both planning retail chains. While the Naira’s devaluation against the dollar is significant, its decline against the rand is relatively small and follows three years of appreciation, which should enable South African retailers to build on their Nigeria presence.

FX: The pair tested new highs again yesterday as the pressure persists, hitting a 184.42 intraday high after opening at 179.10 (about 50 points above previous close). Brent crude going sub $70 had market in panic mode as we opened to some gapping. Late attempt by the CBN to curtail the pressure was futile, so was the presence of about two oil majors in the market. The pair closed 184.00/10. Likely we see some CBN reaction, as the much lower re-pricing of oil price since last Thursday has reversed most the gains achieved by last week’s MPC deliberations.

FIXED INCOME: Continuation of move on Friday (better buyers) again despite oil and FX weakness. Local buying not selective…demand across the curve. With renewed pressure on the naira, expectation was for yields to head north in secondary trading which has not been the case but we expect to see yields climb further at the tbill auction on Wednesday.

COMMODITIES: West Texas Intermediate crude fell, trimming the biggest rally since August 2012 as investors weighed OPEC’s decision to let the market curb a global supply glut. Brent for January settlement dropped as much as 70 cents, or 1 percent, to $71.84 a barrel on the London-based ICE Futures Europe exchange.

EUROPE: European stocks and U.S. equity-index futures followed Chinese shares higher amid speculation the country’s central bank will add stimulus. The Stoxx Europe 600 Index advanced 0.5 percent by 8:20 a.m. in London. The People’s Bank of China, which reduced interest rates on Nov. 21, refrained today from draining funds from the financial system, fuelling speculation it may be preparing to cut banks’ reserve ratio requirements.

INDIA: India’s central bank left interest rates unchanged for a fifth straight meeting while signalling a possible easing early next year after Prime Minister Narendra Modi’s government called for lower borrowing costs. Governor Raghuram Rajan kept the benchmark repurchase rate at 8 percent, the Reserve Bank of India said in a statement in Mumbai today, a move predicted by 44 of 48 economists in a Bloomberg survey. Risks to the central bank’s January 2016 target of 6 percent appear inflation “appear evenly balanced,” he said today in a statement.

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                              13.3000
30 Day                         13.7099
90 Day                         14.3443
180 Day                       15.1255
USD 1 Month              0.1577
USD 2 Months            0.1980
USD 3 Months            0.2346
USD 6 Months            0.3289
USD 12 Months          0.5626

Benchmark Yields
Tenor         Maturity        Yield (%)

91d                19-Feb-15           13.38
182d              14-May-15          13.41
364d              03-Sep-15          13.20
2y                   16-Aug-16          13.42
3y                   27-Apr-17          13.75
5y                   29-Jun-19          13.67

Indicative Currency Exchange Rates
                           Bid         Offer
USDNGN          184.80     185.50
EURUSD           1.2341      1.2543
GBPUSD           1.5624      1.5826
USDJPY             118.79      118.82
USDCHF           0.96245   0.9726
GBPEUR            1.2536      1.2740
USDZAR            10.9099   11.1133
JPYNGN            157.2897  157.3903
CHFNGN           190.35      192.03
EURNGN           230.35      231.71
GBPNGN           290.20      291.60
ZARNGN           15.82         17.74

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