A Review of the Nigerian Energy Industry

Financial market products & services update

Investment chart currency notes and a compass.
Investment chart currency notes and a compass.

24 March 2015, Sweetcrude, Lagos – Local and international financial market products and services update.
NIGERIA: Aggregate banking system credit to the domestic economy rose by 7.1 per cent to N17.2tn in January, the Central Bank of Nigeria’s latest monthly economic report released on Monday indicated. This was in contrast to the growth of 1.5 per cent recorded at the end of December 2014. The CBN report, however, stated that the growth in aggregate banking sector credit to the domestic economy as of January 2014 was 7.2 per cent. The report read in part, “At N17.2tn, aggregate banking system credit to the domestic economy at end-January 2015 rose by 7.1 per cent on month-on-month basis, compared with the growth of 7.2 per cent at the end of the corresponding period of 2014, but was in contrast to the 1.5 per cent decline at end-December 2014. The development reflected, largely, the 55.4 per cent increase in (net) claims on the Federal Government.

FIXED INCOME: The system resumed the day’s session relatively liquid on the back of FAAC posting, and money market rates declined further. New one year bill 17 mar 16 was free to trade yesterday and was well received, closing at 15.50% offer yield down 262bps from auction stop rate. Tbills remained well bid supported by the liquidity in the system. OMO auction yesterday with stop rates maintained and NGN87.95bn sold and the bill auctioned (01 oct 2015) will be free to trade from today. Bond market demand continued yesterday despite a weak open following Nigeria’s downgrade. Quarter 2 bond auction calendar came out yesterday. Same papers as last quarter will be auctioned but a decent 20% decrease in the total amount on offer monthly. The decrease might have been caused by weak participation seen at last quarter’s auctions but this will cause the momentum in the bond market to be sustained even in the days running up to the elections.

FX: Yesterday’s volume was majorly driven by the Central Bank auction activities which closed at 197.00. Amount sold is estimated to be less than $50m and offshore trades remain prioritised. There was a slight oil inflow, estimated to be less than $50m but insignificant to make any big impact as outstanding market demand is estimated to be in the $800m-$1bn. Interbank market remain void of active 2 way trading and trading on an order driven basis. Hence, as expected, no major reaction to Friday’s S&P downgrade of Nigeria’s sovereign credit rating to B+/stable from BB-/ Watch.

USA: Federal Reserve policymakers should wait no more than a few months before considering raising U.S. interest rates from their current near-zero level, a top Fed official said on Tuesday. “I think that by mid-year it will be the time to have a serious discussion about starting to raise rates,” San Francisco Fed chief John Williams said. Rather than risk overshooting on inflation, forcing the Fed to respond with potentially dramatic rate hikes, “I see a safer course in a gradual increase, and that calls for starting a bit earlier,” he said.

CHINA: Activity in China’s factory sector dipped to a 11-month low in March as new orders shrank, a private survey showed, signaling persistent weakness in the world’s second-largest economy that will likely fuel calls for more policy easing to support growth. The poor reading added to signs that the economy has lost momentum despite two interest rate cuts since November, a reduction in the amount of money banks must keep in reserve and repeated attempts by the central bank to reduce financing costs.

COMMODITIES: U.S. crude futures settled more than 1 percent higher on Monday, boosted by a falling dollar that outweighed pressure on prices from a global supply glut. U.S. crude futures settled 88 cents up at $47.45 on Monday, a 1.9 percent climb. The price of Brent rose more than 1 percent to settle up 60 cents at $55.92 per barrel.

Macro Economic Indicators
Inflation rate (YoY) for Nov., 2014                   8.4%
Monetary Policy Rate current                          13.00%
FX Reserve (Bn $) as at January 09 2015     30.077

Money Market Highlights
O/N                                  9.8750
30 Days                           15.6251
90 Days                           16.6405
180 Days                         17.5155

USD 1 Month                 0.1740
USD 2 Months               0.2213
USD 3 Months               0.2668
USD 6 Months               0.3975
USD 12 Months             0.6911

Benchmark Yields
Tenor     Maturity     Yield (%)
91d           25-Jun-15         14.28
182d         10-Sep-15         15.84
364d        03-Mar-16         16.52
2yr            27-Apr-17         15.97
3yr            29-Jun-19        16.04
5yr            13-Feb-20         16.02

Indicative Currency Exchange Rates
                          Bid       Offer
USDNG        196.00       199.50
EURUSD      1.0887       1.1089
GBPUSD       1.4852      1.5054
USDJPY        119.48       119.51
USDCHF      0.95545    0.9656
GBPEUR      1.3507       1.3711
USDZAR      11.7935     11.9969
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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