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.

28 April 2015, Sweetcrude, Houston – Local and international financial market products and services update.
NIGERIA: Anxious to debunk claims that he has something to hide in relation to the allegation that $20 billion was unaccounted for by the Nigerian National Petroleum Corporation (NNPC) during his tenure, President Goodluck Jonathan on Monday ordered that the full report of PricewaterhouseCoopers’ (PwC) forensic audit of the corporation be released immediately to the public so that all Nigerians will be properly informed on the matter.

But while the audit did not mention any missing funds, only requiring NNPC’s exploration and production (E&P) subsidiary – the Nigerian Petroleum Development Company – to remit $1.48 billion to the Federation Account, the report did raise many pertinent questions.

FX: CBN’s special auction rate was maintained at $/NGN 197.00. Latest update has the reserves at $29.505bn [23rd April 2015], slightly up from previous level of $29.48bn [16th April 2015]. No change interbank, bid as usual and illiquid.

FIXED INCOME: Trading activities are expected to be back today. Strong OMO prints yesterday at 15.75% yield. Disruption in trading activities didn’t deter the market with subscription at NGN268bn and only NGN234bn sold. Even without actual figures, everyone knows that the market should be awash with liquidity this week.

CHINA: China’s slowing economy is putting pressure on central banks across Asia to lower interest rates further. For policy makers, that poses a dilemma. The lower rates go, the sharper the U-turn required if the U.S. Federal Reserve delivers as expected this year its first rate increase since 2006, which could lure funds away from emerging markets.

The biggest drag on Asia’s economic outlook remains China, where growth in the first quarter slowed to its weakest since 2009. Declining growth has spurred the People’s Bank of China to cut rates and free up cash for lending.

EUROPE: Policy makers across Eastern Europe seem unbothered by the rallies in their currencies versus the euro. Adopting a passive stance that has surprised some observers, they’ve for the most part opted against trying to reverse the gains of late.

A key to understanding why — according to ING Group NV and Citigroup Inc. — lies in the fact that the euro is also tumbling against the dollar, posting a 10% selloff that has given a boost to euro zone exports to the U.S. and other major markets.

COMMODITIES: Oil declined for a third day before U.S.government data forecast to show crude stockpiles expanded further from a record. Brent for June settlement decreased as much as 93 cents, or 1.4%, to $63.90 a barrel on the London-based ICE Futures Europe exchange. The European benchmark crude traded at a premium of $7.81 to WTI.

The oil market is in “excellent” condition, said Prince Abdulaziz bin Salman, Saudi Arabia’s deputy oil minister. The world’s biggest exporter seeks to keep customers happy and maintain stability of prices, demand and supply, he told reporters Monday in the eastern city of Khobar.

Macro Economic Indicators
Inflation rate (YoY) for Nov., 2014                   8.50%
Monetary Policy Rate current                          13.00%
FX Reserve (Bn $) as at January 09 2015     29.505

Money Market Highlights
O/N                                   9.1250
30 Days                           13.5102
90 Days                           14.8155
180 Days                         16.0000

USD 1 Month                 0.1812
USD 2 Months               0.2317
USD 3 Months               0.2790
USD 6 Months               0.4076
USD 12 Months             0.7011

Benchmark Yields
Tenor     Maturity     Yield (%)
91d           30-Jul-15          11.71
182d         15-Oct-15          13.15
364d        07-Apr-16         14.13
2yr            27-Apr-17         13.62
3yr            30-May-18       13.76
5yr            13-Feb-20        13.90

Indicative Currency Exchange Rates
                          Bid       Offer
USDNG         196.00      199.50
EURUSD      1.o787       1.0989
GBPUSD       1.5150       1.5352
USDJPY        118.98       119.01
USDCHF       0.95005   0.9602
GBPEUR       1.3905       1.4109
USDZAR      11.8682     12.0716
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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