Financial market products & services update

Currency notes, investment chart & a compass.

Currency notes, investment chart & a compass.

12 May 2015, Sweetcrude, Houston – Local and international financial market products and services update.
NIGERIA: In line with the increased capital requirements under Basel II Capital Accord, the CBN, has given at least six banks in the country deadline to ramp up their capital base. According to reliable industry sources, many banks have not met the Basel II capital requirement and will need to raise additional capital to beef up their capital base within the next 12 months. To this end, the sources explained that the CBN has directed the wanting banks to submit a recapitalisation plan, outlining the timeline for their capital raising plan, to the apex bank by June 2015. As it was gathered, the banks are expected to implement the recapitalisation plan and complete it by the end of June 2016.While the capital adequacy ratio of most banks is generally above the minimum regulatory threshold of 15 per cent, the adoption of Basel II implies additional capital as banks grow their risk assets.

FX: Today’s special auction closed with an estimated $25m – $35m sold and intervention rate maintained at $/NGN 197.00. About $50m oil flow was reportedly auctioned earlier in the day at a closing rate of $/NGN 199.00. BDC/parallel market unchanged and remains in the $/NGN 219.00 – $/NGN 221.50 range.

FIXED INCOME: It felt like a fairly quiet day. Relatively low activity in the bond market though there was decent demand on the long end of the bond curve. N12.3bn traded on the July 2034s but yield only lower by a marginal 4bps because we had opened the day wider. OMO auction seemed somewhat unsuccessful with only NGN21.13bn sold after CBN capped the yield lower (14.87% from 15.50% at the last auction) since a shorter dated paper was on offer. This caused a tale of two halves in tbill secondary trading – some sell-off was seen when the auction was initially announced but then decent buying to close the day after the result was released. Liquidity conditions net of the OMO sale will remain quite supportive (a little over NGN400bn). O/N rates closed at 10%.

COMMODITIES: Brent oil price is not expected to rebound to more than $70/bbl and should stabilize at $65/bbl for the rest of this yr, Colombia Finance Minister Mauricio Cardenas tells Pimm Fox and Betty Liu in Bloomberg TV interview.

EUROPE: Britain could potentially leave the European Union as early as next year as Prime Minister David Cameron is allegedly already putting plans in motion to bring forward an in/out referendum by a year. If Britons vote to leave the EU, this means the country could technically start severing its ties by the end of 2016. The Conservatives won the May 7 General Election with a 12 seat majority. The Tories will have to deliver a referendum by 2017 over whether Britain will stay part of the EU or not, since it was a linchpin pledge during the campaign.

CHINA: China has recently run its first successful test flight of its CH-3 unmanned aerial vehicle (UAV) equipped with a locally made aircraft engine, reports the PLA Daily, the official newspaper of China’s armed forces. This marks a milestone in China’s history of drone research and development as it was the first time that a domestically made engine was installed to the country’s mid- to large-sized unmanned drone instead of an imported model.

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                                   9.8750
30 Days                           13.5013
90 Days                           14.8234
180 Days                         15.9936

USD 1 Month                 0.1856
USD 2 Months               0.2285
USD 3 Months               0.2766
USD 6 Months               0.4142
USD 12 Months             0.7326

Benchmark Yields
Tenor     Maturity     Yield (%)
91d           06-Aug-15         10.29
182d         15-Oct-15          12.19
364d        21-Apr-15          15.19
2yr            27-Apr-17         13.95
3yr            29-May-19       13.75
5yr            13-Feb-20        13.79

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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