A Review of the Nigerian Energy Industry

Financial market products & services update

Financial markets08 December 2014, Sweetcrude, Houston – Local and international financial market products and services update.
NIGERIA: Nigeria’s overnight lending rate spiked to 30 percent on Friday while the naira stabilised, after the central bank drained liquidity from the banking system as part of efforts to support the currency, hit by falling global oil prices. The central bank withdrew around 300 billion naira ($1.7 billion) from the system this week to reinforce monetary tightening introduced last week, pushing the interbank overnight lending rate up to 30 percent, from 12 percent a week ago, dealers said. The central bank is struggling to prop up the naira, which has taken a beating over the past few months as falling oil prices have shaken confidence in the assets of Africa’s leading energy producer. As the bank has been forced to tighten monetary policy to defend the currency, it also risks hurting Africa’s biggest economy as high interbank rates will constrain credit growth and could create bad loan problems for lenders.

FIXED INCOME: There was more re-pricing in the tbill curve as tight liquidity in the money market caused more sell-off in short dated tbills, which had a ripple effect on other maturities. 16% handle traded on the 08 January bills and market was happy to hold at that level. The new one year bill has brought some correction to the one year space after being distorted for most of the quarter (no 1year bill issued this quarter was up to the minimum tradeable size). Bond market was muted with yields closing relatively unchanged. O/N rates closing at the 30% area and money market should continue to be tight next week with 11 December 14 maturity of NGN160bn looking like it will have very little effect to help current market conditions.

COMMODITIES: Oil prices fell more than a dollar at one stage on Monday after Morgan Stanley cut its forecast for Brent crude, approaching a five-year low hit early this month, and the market got little support from mixed Chinese trade data. Brent crude for January delivery dropped to a low of $67.73 a barrel, near last week’s trough of $67.53.

CHINA: China’s trade surplus climbed to a record in November after an unexpected decline in imports on lower crude oil and other commodity prices. Overseas shipments rose 4.7 percent from a year earlier, missing the 8 percent median estimate in a survey. Imports fell 6.7 percent, compared with projections of a 3.8 percent increase, leaving a trade surplus of $54.47 billion, the customs administration said today.

EUROPE: The Bank of England is willing to put aside its own forward guidance to determine how well the country’s eight largest lenders would fare in a crisis. Governor Mark Carney has said rate increases from the current record-low 0.5 percent are likely to be gradual and the peak in rates lower than in previous cycles. Yet in its stress test of the U.K.’s eight largest banks, the BOE assumes an increase by the end of 2015.

Macro economic Indicators
Inflation rate (YoY) for Oct. 2014                          8.10%
Monetary Policy Rate current                               13.00%
FX Reserves (Bn $) as at December 15 2014     36.565

Money Market Highlights

O/N                             25.4217
30 Day                        15.5542
90 Day                        15.8640
180 Day                      16.4375
USD 1 Month            0.1580
USD 2 Months          0.1997
USD 3 Months         0.2356
USD 6 Months         0.3304
USD 12 Months       0.5766

Benchmark Yields
Tenor      Maturity       Yield (%)

91d             05-Mar-15       14.50
182d          14-May-15        13.67
364d          03-Sep-15        15.39
2y               16-Aug-16        13.77
3y               27-Apr-17        13.81
5y               29-Jun-19       13.85

Indicative Currency Exchange Rates
Bid             Offer

USDNGN         163.50          164.20
EURUSD         1.2545           1.2747
GBPUSD         1.6034           1.6236
USDJPY          108.93           108.96
USDCHF         0.95075        0.9609
GBPEUR         1.2657           1.2861
USDZAR         11.0950        11.2984
JPYNGN         150.6397     150.7403
CHFNGN        170.49          172.18
EURNGN       206.95          208.31
GBPNGN       263.53           264.92
ZARNGN        13.67              15.59

In this article

Join the Conversation