A Review of the Nigerian Energy Industry

Financial market products & services update

Coins on a financial chart.
Coins on a financial chart.

18 May 2015, Sweetcrude, Houston – Local and international financial market products and services update.
NIGERIA: Nigeria’s state-owned Bank of Industry, which provides funding for companies in the West African nation, plans to sell its first debt as it seeks to support diversification of the economy from oil and boost employment. The debt “will most likely be issued next year as local bonds to enable us to boost lending and profitability,” Chief Executive Officer Rasheed Olaoluwa said in a May 16 interview in Lagos, Nigeria’s commercial capital. The lender will appoint an adviser to guide on the size and issuance program, he said. Economic growth in Africa’s biggest crude producer fell on an annual basis in the first quarter to 4 percent, compared with 5.9 percent a quarter earlier as the oil industry, the nation’s major revenue earner, contracted amid a slump in prices, the statistics agency said May 14.

FIXED INCOME: Bond market was well bid most of last week except Friday. News of the JPM research filtered into the market early in the trading session. Article which recommended to be underweight Nigeria Eurobonds after the recent rally was interpreted by a decent majority locally as a negative. Some profit takers had been seen before this, but the ‘news’ amplified the selloff before buyers then emerged to take advantage of cheap paper. Overall yields still closed higher by 5bps. Tbill yields continue to inch higher as money market starting to feel tight. Liquidity opened NGN154bn long but O/N rates closed flat (11%). Nigeria’s MPC meeting will take place on Monday and Tuesday next week and then tbill auction on Wednesday.

FX: The special auction continued on Friday with no change in modalities. Total sales last week is estimated to be about $360m with the intervention rate maintained at 197.00. There was some oil flow activities. The interbank market remained very illiquid and bid.

COMMODITIES: Oil climbed above $60 a barrel amid speculation over the pace of production growth in the U.S. Brent for July settlement gained 86 cents to $67.67 a barrel on the London-based ICE Futures Europe exchange. Prices gained 2.2 percent last week.

EUROPE: Greece’s government said it won’t back down on election pledges to end austerity even while seeking to agree on a deal with creditors as soon as this week to unblock financing and avert a default. More than 110 days of talks between Greece and its creditors have failed to produce an agreement to unlock additional aid from a 240 billion-euro ($275 billion) bailout. The standoff has triggered a liquidity squeeze, pulling the country back into a recession and renewing doubts over Greece’s future in the euro area.

CHINA: China’s stocks fell to the lowest level in a week, led by commodity and financial companies, amid concern economic growth remains sluggish and that a flood of new share sales will lure funds from existing equities. The Shanghai Composite Index slid for a second day, losing 0.6 percent to 4,283.49 at the close. Twenty companies are scheduled to sell initial public offering shares from Tuesday to Thursday, which may freeze 2.8 trillion yuan ($451.1 billion).

Macro Economic Indicators
Inflation rate (YoY) for Nov., 2014                   8.70%
Monetary Policy Rate current                          13.00%
FX Reserve (Bn $) as at January 09 2015     29.7863

Money Market Highlights
O/N                                  13.5417
30 Days                           14.7638
90 Days                           15.6932
180 Days                         16.6143

USD 1 Month                 0.1862
USD 2 Months               0.2247
USD 3 Months               0.2765
USD 6 Months               0.4127
USD 12 Months             0.7233

Benchmark Yields
Tenor     Maturity     Yield (%)
91d           06-Aug-15         10.67
182d         15-Oct-15          13.59
364d        05-May-16        15.13
2yr            27-Apr-17         13.81
3yr            29-May-19       13.68
5yr            13-Feb-20        13.61

Indicative Currency Exchange Rates
                          Bid       Offer
USDNG         196.00     199.50
EURUSD      1.1286       1.1488
GBPUSD       1.5574      1.5776
USDJPY        119.64      119.67
USDCHF       0.91455   0.9247
GBPEUR       1.3664      1.3868
USDZAR      11.7205     11.9239
JPYNGN      166.3497  166.4503
CHFNGN       215.03      216.72
EURNGN        N/A         N/A
GBPNGN         N/A         N/A
ZARNGN         N/A         N/A

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