A Review of the Nigerian Energy Industry

Financial market products & services update

Financial markets
Financial markets

11 May 2015, Sweetcrude, Houston – Local and international financial market products and services update.
NIGERIA: The Central Bank of Nigeria (CBN) has started talks with banks and currency dealers on how to loosen foreign-exchange trading restrictions while still maintaining stability in the naira, people familiar with the discussions said. The Financial Markets Dealers Association (FMDA), a Lagos-based industry body, met this week to put a proposal together that may be presented to the regulator this week. The FMDA will recommend ways to increase trading and liquidity in the foreign-exchange market, while at the same time avoiding speculative demand that might significantly weaken the naira, they said. The CBN has implemented several measures since December to bolster the naira, which has weakened 19 per cent against the dollar since the end of June, by limiting the buying of dollars in the interbank market and in February, it introduced a so-called order-based trading system in which banks can only buy foreign currency when they have matching orders from clients that need to import goods.

FX: CBN sold an estimated $150m at today’s special auction, maintaining the intervention rate at $/NGN 197.00. No change interbank, bid as usual and illiquid. Current gross FX reserves (30 days moving average) is $29.630bn [last updated 5th May 2015]; relatively flat over the last 1 month. [ $29.614bn as at 7th April, 2015].

FIXED INCOME: Trading session was much more relaxed on Friday; no major direction in the Tbills market except for the very short end where market players were buying, the rest of the curve was marginal flat. The selloff continued on bond though, profit taking from street was the order of the day. 2024 and 2034 most traded on Friday and this might not be unconnected to the auction this week. O/N remains at 9% with money market liquidity at NGN494bn.

COMMODITIES: Brent advances for 1st time in three sessions to trade in narrow 50c range. WTI extends gains after rising for 8th consecutive wk as Baker Hughes rig count showed active U.S. rigs falling for 22nd week. June Brent +10c at $65.49/bbl as of 9:09am London.

EUROPE: The euro fell for a third day against the dollar before European finance ministers meet on Monday to discuss the financial aid that Greece needs to stave off a default. The single currency extended its slide from a 2 1/2-month high before a Tuesday deadline for Greece to pay the International Monetary Fund. German Chancellor Angela Merkel is under pressure from within her own party bloc to give up on the debt-ridden nation to preserve the euro. New Zealand’s dollar plunged as speculation mounted that its central bank would cut interest rates.

CHINA: China’s central bank cut interest rates for the third time in six months as it ratchets up support for an economy grappling with a debt overhang and property slump. The People’s Bank of China reduced the one-year lending rate 0.25 percentage point to 5.1 percent and cut the one-year deposit rate by the same amount to 2.25 percent, effective Monday. In another step to free up interest rates, the central bank will also raise the limit on what banks can pay savers.

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     29.670

Money Market Highlights
O/N                                   9.2917
30 Days                           13.1588
90 Days                           14.4152
180 Days                         15.7801

USD 1 Month                 0.1848
USD 2 Months               0.2280
USD 3 Months               0.2798
USD 6 Months               0.4142
USD 12 Months             0.7326

Benchmark Yields
Tenor     Maturity     Yield (%)
91d           06-Aug-15         10.22
182d         15-Oct-15          12.15
364d        21-Apr-15          15.16
2yr            27-Apr-17         13.88
3yr            29-May-19       13.70
5yr            13-Feb-20        13.72

Indicative Currency Exchange Rates
                          Bid       Offer
USDNG         196.00      199.50
EURUSD      1.1161        1.1363
GBPUSD       1.5467      1.5669
USDJPY        120.06      120.09
USDCHF       0.91705   0.9272
GBPEUR       1.3669      1.3873
USDZAR      11.9201     12.1235
JPYNGN      165.7297  165.8303
CHFNGN       215.03      216.72
EURNGN        N/A         N/A
GBPNGN         N/A         N/A
ZARNGN         N/A         N/A

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