A Review of the Nigerian Energy Industry

Financial market products & services update

Currency notes, coins and gold bars.
Currency notes, coins and gold bars.

15 May 2015, Sweetcrude, Houston – Local and international financial market products and services update.
FX: No change in the interbank market. Liquidity situation remain dire as CB continues to selectively meet onshore demand. Yesterday’s special auction closed with all modalities maintained. CB sold an estimated $25m-$30m at $/NGN 197.00.
BDC/parallel market rate is unchanged and remains in the $/NGN 219.00 – $/NGN 221.50 range.

FIXED INCOME: Bond yields had tightened about 20bps on the back of expectations of spillover demand from Wednesday’s auction before profit takers emerged. We closed marginally lower day on day after the early rally. The CBN announced the second OMO auction of the week, selling N119.24bn of 182day paper. Despite the sustained decline in system liquidity, O/N rates remained unchanged at 12%. T-bills market remained bearish as yields increased an average of 10bp on the back of the OMO. Money market opened NGN253bn long.

NIGERIA: Nigerian onshore oil field ownership by local companies may come to an abrupt end if local banks are unable to extend
the loans needed to maintain production and continue field development. While Nigerian banks have played a pivotal role in financing the local oil industry, the central bank may force them to lower exposure to oil loans that are now considered risky after crude’s price decline. Consequently, Nigerian companies may be forced to sell some assets back to larger foreign companies.

COMMODITIES: Oil pared its ninth weekly advance; the longest rising streak since trading started in 1983, amid speculation the market’s rebound to $60 a barrel will sustain a global supply glut. Futures slid as much as 0.5% in New York, retreating for a third day. OPEC and U.S. shale explorers are set to expand production later this year, preventing further price gains.
US: U.S. stocks rose for the first time this week, with the Standard & Poor’s 500 Index topping its closing record, as the dollar fell a third day and a bond-market selloff showed signs of easing.

The Standard & Poor’s 500 Index increased 1 percent at 3:03 p.m. in New York. The gauge has climbed 1.8 percent since falling to a one-month low May 6. The Bloomberg Dollar Spot Index retreated 0.3 percent, headed for a fifth weekly decline.
The yield on 10-year Treasuries fell six basis points to 2.24 percent while German bund rates slipped two basis points. Gold rose to the highest since February.

CHINA: Chinese stocks trading in Hong Kong fell to the lowest level in a week amid waning volumes on concern policy easing is failing to boost economic growth. Financial and consumer-discretionary companies led declines, with China Minsheng Banking Corp. and Great Wall Motor Co. sliding more than 2 percent. Property developers slumped in Shanghai, with Poly Real Estate Group Co. dropping 4.3 percent after banks’ new lending slumped. Tencent Holdings Ltd. jumped2.9 percent in Hong Kong after reporting a record profit.

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     29.763

Money Market Highlights
O/N                                  10.9167
30 Days                           14.0398
90 Days                           15.3887
180 Days                         16.6075

USD 1 Month                 0.1833
USD 2 Months               0.2237
USD 3 Months               0.2760
USD 6 Months               0.4127
USD 12 Months             0.7228

Benchmark Yields
Tenor     Maturity     Yield (%)
91d           06-Aug-15         10.36
182d         15-Oct-15          13.14
364d        05-May-16        15.17
2yr            27-Apr-17         13.50
3yr            29-May-19       13.47
5yr            13-Feb-20        13.46

Indicative Currency Exchange Rates
                          Bid       Offer
USDNG         196.00     199.50
EURUSD      1.1292       1.1494
GBPUSD       1.5664      1.5866
USDJPY        119.46      119.49
USDCHF       0.90955   0.9197
GBPEUR       1.3735      1.3939
USDZAR      11.7001     11.9035
JPYNGN      166.5697  166.6703
CHFNGN       215.03      216.72
EURNGN        N/A         N/A
GBPNGN         N/A         N/A
ZARNGN         N/A         N/A

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