A Review of the Nigerian Energy Industry

Financial market products & services update

Investment chart, dollar bills and a compass.
Investment chart, dollar bills and a compass.

13 February 2015, Sweetcrude, Lagos – Local and international financial market products and services update.
NIGERIA: Central Bank of Nigeria (CBN) Governor, Mr. Godwin Emefiele, has reiterated that there is no need for panic over the recent depreciation of the naira against the dollar, even as he reassured investors that the central bank will continue to meet legitimate foreign exchange demand.

Emefiele maintained that globally, economies including Nigeria were contending with the drop in commodity market especially oil prices, saying: “The price of crude oil dropped from $115 per barrel to below $50 per barrel which has affected activities on the Nigerian capital market.”

He explained that this had led to the All-Share Index’s decline by 28bp adding that the country’s gross domestic product (GDP) might also drop.

FX: The FX market has been volatile over the last two days. We have seen the FMDQ’s 2% daily circuit breaker resulting in early shut downs. A further trigger level was introduced yesterday as 1.5% cap from the initial breaching level after a 1hour recess in the market.

Market had a nervous open with spot very illiquid in the first hour of the day’s session. CBN intervened yet again with an estimate of $60mio.

FIXED INCOME: T-bill market saw some decent demand with improved liquidity in the system (long N341.60bn – N285bn OMO bills matured today). OMO auction yesterday following the maturity with discount rate of 14.50% maintained – bid/cover at 1.16 (N87.72bn sold). Details on when the new 5 year bond will be free to trade not yet communicated.

CHINA: China’s benchmark money-market rate was headed for the longest run of weekly gains since 2013 as demand for funds increased before the Lunar New Year holidays.

Initial public offerings by about 24 companies’ tightened liquidity, with 2.05 trillion yuan ($328 billion) locked up in the past five days, a Bloomberg News survey showed. The largest cash injections by the People’s Bank of China via open-market operations in a year failed to bring down the rate before the week-long holidays starting Feb. 18.

U.S: U.S. investment-grade bonds are offering the deal of the decade to European investors struggling to make money in credit markets as Mario Draghi’s record stimulus suppresses interest rates.

Debt of the safest American companies yields 2.09% points more than similar European securities, the most extra compensation since 2005, according to Bank of America Merrill Lynch index data. Yields are so negligible in Europe that top-rated U.S. notes offer only 1.24% points less than European junk bonds.

COMMODITIES: Oil extended gains after rallying the most in more than a week amid speculation that a decline in U.S. drilling will slow production and curb a global supply glut. Oil extended gains after rallying the most in more than a week amid speculation that a decline in U.S. drilling will slow production and curb a global supply glut. Oil is recovering from the lowest levels in almost six years as U.S. drillers cut the number of rigs in service to the fewest since December 2011.

Macro Economic Indicators
Inflation rate (YoY) for Nov., 2014                 8.00%
Monetary Policy Rate current                          13.00%
FX Reserve (Bn $) as at January 09 2015     33.314

Money Market Highlights
O/N                                 14.6833
30 Days                           15.0328
90 Days                           15.8094
180 Days                         16.4931

USD 1 Month                0.1720
USD 2 Months              0.2115
USD 3 Months              0.2581
USD 6 Months              0.3769
USD 12 Months            0.6716

Benchmark Yields
Tenor     Maturity     Yield (%)
91d           14-May-15        13.97
182d         06-Aug-15       12.96
364d         21-Jan-16        16.69
2yr            16-Aug-16        15.82
3yr            31-Aug-17        16.06
5yr            23-Oct-19         15.98

Indicative Currency Exchange Rates
                          Bid       Offer
USDNG          N/A           N/A
EURUSD      1.1330        1.1532
GBPUSD       1.5283       1.5485
USDJPY       118.95         118.98
USDCHF      0.92295      0.9331
GBPEUR      1.3355         1.3559
USDZAR      11.6278      11.8312
JPYNGN          N/A            N/A
CHFNGN         N/A            N/A
EURNGN         N/A            N/A
GBPNGN         N/A            N/A
ZARNGN         N/A            N/A

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