A Review of the Nigerian Energy Industry

Financial market products & services update

Financial markets
Financial markets

27 March 2015, Sweetcrude, Lagos – Local and international financial market products & services update.
NIGERIA: The value of Nigeria’s external reserves, which has been on the downswing in the past few weeks, fell below the $30 billion mark to $29.865 billion as at March 25, 2015, according to latest Central Bank of Nigeria’s (CBN’s) figures. Reports show that the current level of the foreign reserves, which is derived mainly from the proceeds of crude oil earnings, has fallen by 13.4 per cent or $4.628 billion this year, compared with the $34.493 billion it stood at the beginning of the year. This has been attributed to the significant reduction in forex inflow into the country occasioned by the sustained low crude oil prices. Oil prices however rallied for a second straight day on Thursday after Saudi Arabia and its Gulf Arab allies began air strikes in Yemen, sparking fears of a bigger Middle East battle that could disrupt world crude supplies.

FIXED INCOME: A somewhat bid morning in bonds with modest lifting of Aug 2016s, April 2017s and Jan 2022s but became dull for the most part of the day. Market has lost its steam and will be like that today as street will call it an early weekend to prepare for the elections. It was business as usual in the money market – OMO maturity caused slightly lower O/N rates 12.50% (down 2%) and of course OMO auction floated on the back of the maturity with NGN105bn sold. Tbill market saw net sellers across.

FX: Status quo maintained yesterday. CBN’s intervention rate was maintained at 197.00. No oil activity, thus interbank market remained quiet.

USA: The number of Americans filing new claims for jobless benefits fell more than expected last week while activity in the services sector hit a six-month high in March, underscoring the economy’s solid fundamentals despite a recent softening in growth. Harsh weather, the now-settled labor dispute at the country’s busy West Coast ports, softer global demand and a strong dollar undercut growth early in the first quarter. Thursday’s upbeat reports, however, implied the slowdown would be temporary.

CHINA: Two more big Chinese banks reported sluggish profits for last year as the cooling Chinese economy took its toll on profitability and bad loans piled up, underscoring concerns over the health of the nation’s banking sector. Industrial & Commercial Bank of China Ltd. and Bank of Communications Co., Ltd.—the nation’s No. 1 and No. 5 lenders in terms of assets—on Thursday reported a sharp rise in bad loans, joining two of their peers that reported similar results earlier in the week. For years, China’s state-run banks were able to turn in double-digit growth, propelled by a robust economy with steady demand from domestic companies for credit. But China’s economy put in its worst performance in more than two decades last year, and so far all of the big banks have reported only single-digit growth in earnings.

COMMODITIES: U.S. crude settled up $2.22, or 4.5 percent, at $51.43 a barrel on Thursday, its highest settle since March 4 after Saudi Arabia and its Gulf Arab allies began airstrikes in Yemen, sparking fears of a bigger Middle East battle that could disrupt world crude supplies.

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     29.865

Money Market Highlights
O/N                                 12.6250
30 Days                           15.8722
90 Days                           16.8304
180 Days                         17.6376

USD 1 Month                 0.1778
USD 2 Months               0.2215
USD 3 Months               0.2730
USD 6 Months               0.4019
USD 12 Months             0.6999

Benchmark Yields
Tenor     Maturity     Yield (%)
91d           25-Jun-15          14.94
182d         10-Sep-15          15.82
364d        03-Mar-16         15.71
2yr            27-Apr-17          15.71

3yr            29-Jun-19         15.78
5yr            13-Feb-20         15.77

Indicative Currency Exchange Rates
                          Bid       Offer
USDNG        196.00       199.50
EURUSD      1.0710       1.0912
GBPUSD       1.4711       1.4913
USDJPY        119.43       119.46
USDCHF       0.96325    0.9734
GBPEUR       1.3598       1.3802
USDZAR      11.9237     12.1271
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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