A Review of the Nigerian Energy Industry

Financial market products & services update

Coins & graphs.
Coins & graphs.

09 December 2014, Sweetcrude, Houston – Local and international financial market products & services update.
NIGERIA: Nigeria won’t resort to printing money or imprudent borrowing as it adjusts to lower prices of oil, the mainstay of its economy, Finance Minister Ngozi Okonjo- Iweala said. “This is not the first time this country has gone through lower oil prices and it will not be the last,” she said at a conference in the capital, Abuja. “We should avoid the kind of fear that will paralyze us or make us do the wrong things out of fear and alarm.” Nigeria, which is facing general elections in February, lowered its proposed budgeted oil price last week to $65 per barrel, the second cut in less than a month, signalling that government revenue is set to plunge in Africa’s biggest crude producer. Any borrowing will be done “judiciously,” Okonjo-Iweala said. Increased tax revenue and an expanding private sector would help the West African country offset the impact of falling oil prices, she said.

FIXED INCOME: Tbill trading has continued to be dominated by money market related headlines with O/N rates in the 60% area (the high for the year). Liquidity continues to be tight (opening at NGN18 billion short) and will remain so till NGN160.60 billion of tbills mature on the 11 December. 8 January bills tested 17% handle yesterday and 1 January bills 19% handle is feeling the most pressure so it’s no surprise that the new one year tbill is not doing so great. All in all, patchy trading in secondary trading with only a handful of tbills traded yesterday. Bonds remained quiet ahead of the bond auction but definitely creeping weaker with each passing day as continuous decline in Brent continues to weigh in on the market.

FX: Market opened at 180.00/10 to another volatility laden day as the pressure was still persistent in the interbank market. CBN intervened in the market yesterday to ease a bit of the pressure, with very little impact. Market closed at 180.50/60.

CBN RDAS AUCTION: CBN offered 200million and sold 199.98million. Marginal rate remained at 168.00 (1% commission excluded). 21 Banks participated.

USA: The Federal Reserve’s vow to keep interest rates near zero for a “considerable time” is likely to remain in place for now, with the U.S. central bank set to take a slow and steady approach to its first rate rise in a decade. The pledge will be up for debate again when policymakers meet next week, with a strong jobs report bolstering the case of officials who want to remove it. But others feel it still has some shelf life, and even when officials drop it, they will almost certainly insert a placeholder to assure financial markets any rate hike is still a ways off.

CHINA: China’s exports rose 4.7% in November from a year ago, compared to market forecasts of a 8.2% jump. Imports fell 6.7% in the same period against predictions of a 3.9% rise. The surprise slump in imports led the trade surplus to hit a record $54.5bn (£35bn), the highest in 14 years. While the trade surplus, which is up 61% compared to last year, will add to economic growth in the fourth quarter, it does suggest the government needs to step in to stimulate growth, analysts stated.

COMMODITIES: World oil prices slid another 4 percent to new five-year lows on Monday, as expectations of a deeper slump next year and a prediction by a core OPEC member that crude will remain at $65 for several months triggered another round of selling. Brent crude for January fell was last down 4 percent at $66 a barrel, after slipping to a session low of $65.93—its lowest since October 2009.

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

Money Market Highlights
O/N                              44.1267
30 Days                       17.5674
90 Days                       17.0220
180 Days                     16.9735

USD 1 Month              0.1617
USD 2 Months            0.2030
USD 3 Months            0.2374
USD 6 Months            0.3399
USD 12 Months          0.6031

Benchmark Yields
Tenor       Maturity      Yield (%)
91d             05-March-15   14.32
182d          14-May-15        13.66
364d          03-Dec-15        15.57
2yr             16-Aug-16        13.98
3yr             27-Apr-17        13.88
5yr             26-June-19      13.94

Indicative Currency Exchange Rates
Bid       Offer

USDNG           180.10       180.80
EURUSD        1.2232        1.2434
GBPUSD         1.5566        1.5768
USDJPY          119.92        119.95
USDCHF         0.96965    0.9798
GBPEUR         1.2602       1.2806
USDZAR         11.4308     11.6342
JPYNGN         151.9997    152.1003
CHFNGN        186.40       188.09
EURNGN        224.41       225.77
GBPNGN        285.27       286.67
ZARNGN           14.86         16.78

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