A Review of the Nigerian Energy Industry

Financial market products & services update

Currency notes, coins & gold bars.
Currency notes, coins & gold bars.

09 April 2015, Sweetcrude, Lagos – Local and international financial market products and services update.
NIGERIA: Ratings agency Moody’s has said Nigeria’s recent peaceful transition of power is credit positive, but admitted that the country’s economic challenges still remain. Nigeria is rated Ba3 stable.

According to Moody’s, Nigeria’s peaceful transition of power from the ruling Party (PDP) of Dr. Goodluck Jonathan to the ex-military leader, General Muhammadu Buhari, underscored the strengthening of Nigeria’s democratic credentials.

FX: The parallel market appreciation seems abated lately, with an uptick seen in last two days. CBN’s special auction intervention rate was maintained at 197.00 yesterday; an estimated $20m-$30m was sold. CB governor was quoted as “not in a hurry in loosening present FX restrictions”, also stating need to align with fiscal authorities in light of the change in government in May.

FIXED INCOME: Nigeria Fixed Income traded weaker again yesterday in both T-bills and bond markets. T-bill auction printed at yields of 10.78%, 15.17% and 16.47% respectively on the 91day, 182day and 364day papers. Average bid/cover at the auction was 2.30x.

MARKET MONEY: Money market still fairly liquid – went up NGN205bn approximately. O/N rates at 14%.

There are plenty of things luring short- sellers to the Yuan right now. Growth is slowing. Capital is flowing out. And by some measures, the Yuan is the most overvalued currency in the world. Yet there’s one big reason not to bet against it: The People’s Bank of China is on the other side of the trade.

Chinese policy makers will do whatever it takes to ensure a stable exchange rate before the International Monetary Fund starts discussing the possibility of adding the Yuan to the ranks of the world’s reserve currencies in May, according to Barclays Plc and DBS Group Holdings. They’ve already been tapping their almost $4 trillion in foreign reserves to do this, spending an estimated $33 billion in the first quarter to halt a slump that had sent the Yuan to a two-year low in March.

USA: The Federal Reserve’s plan to increase interest rates is turning into more of a big dud than a big short for bond. The Fed is preparing to increase interest rates after keeping its benchmark close to zero for six years to help the economy recover from its worst downturn since the Great Depression. Chair Janet Yellen said in March she expects to move this year.

The danger is that investors will respond by demanding higher yields on their Treasuries. And when yields go up, prices go down. Since government and corporate bonds around the world tend to follow U.S. government securities, it creates the potential for a global debt-market rout.

COMMODITIES: Copper’s global surplus may shrink this year as tight scrap supply forces China to boost imports of refined metal, according to Standard Chartered Plc.

Scrap copper imports by China, the world’s largest producer and consumer of the metal used in pipes, electrical wires and appliances, fell to a six-year low in February as global supply shrank. The lack of used copper will force fabricators in China to rely on higher imports of the refined material and risks depleting a forecast this year for an 86,000-metric-ton surplus, according to Nicholas Snowdon, a London-based metals analyst at Standard Chartered.

Macro Economic Indicators
Inflation rate (YoY) for Nov., 2014                   8.40%
Monetary Policy Rate current                          13.00%
FX Reserve (Bn $) as at January 09 2015     29.614

Money Market Highlights
O/N                                  14.1417
30 Days                           14.4987
90 Days                           16.0144
180 Days                         16.8556

USD 1 Month                 0.1802
USD 2 Months               0.2237
USD 3 Months               0.2737
USD 6 Months               0.3984
USD 12 Months             0.6856

Benchmark Yields
Tenor     Maturity     Yield (%)
91d           02-Jul-15          13.58
182d         01-Oct-15          14.31
364d        24-Mar-16         13.60
2yr            27-Apr-17          14.45
3yr            29-Jun-19         14.33
5yr            13-Feb-20         14.34

Indicative Currency Exchange Rates
                          Bid       Offer
USDNG        198.60       199.30
EURUSD      1.0645       1.0847
GBPUSD       1.4691       1.4893
USDJPY        120.26       120.29
USDCHF       0.96625    0.9764
GBPEUR       1.3663       1.3867
USDZAR      11.7395     11.9429
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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