A Review of the Nigerian Energy Industry

Financial market products & services update

Currency notes, investment chart and a compass.
Currency notes, investment chart and a compass.

21 May 2015, Sweetcrude, Houston – Local and international financial market products and services update.
FX: No change in the special auction modalities. CB sold an estimated $20m yesterday, maintaining the intervention rate at $/NGN 197.00. The interbank market remained highly illiquid.

FIXED INCOME: T-bills continued to trend higher today especially on the short end of the curve owing mostly to the expected outcome of the CRR decision rather than the primary auction [results still pending]. T-bills yields inched up by about 30bps. Bonds are not reacting in the same quantum as bills, though in the same trend, yield marginally pushed up by 3bps. FAAC flows came into the market yesterday about $201bn and money market liquidity up by NGN253bn crashing overnight from above 50% to 10.50%.

COMMODITIES: Oil held gains as investors weighed easing U.S. crude stockpiles against signs that producers will boost drilling. Oil rebound from a six-year low has faltered amid speculation that rising prices will encourage U.S. production. Crude stockpiles near the highest level in 85years will continue to weigh on the market.

NIGERIA: The direction and programmes of the incoming administration of Major General Muhammadu Buhari (rtd) appears to be emerging with the guide being offered in the form of start-up reform marshal plan by a former British Prime Minister, Mr Tony Blair, who urged him to carry out a complete overhaul of the Nigerian National Petroleum Corporation (NNPC) and solve the problematic petroleum subsidy regime within the first 100 days of assuming office. The direction and programmes of the incoming administration of Major General Muhammadu Buhari (rtd) appears to be emerging with the guide being offered in the form of start-up reform marshal plan by a former British Prime Minister, Mr Tony Blair, who urged him to carry out a complete overhaul of the Nigerian National Petroleum Corporation (NNPC) and solve the problematic petroleum subsidy regime within the first 100 days of assuming office.

US: The dollar rose against the euro as minutes from the Federal Reserve’s last meeting bolstered bets the U.S. will tighten monetary policy before central-bank officials in Europe. The greenback traded close to the highest level in three weeks versus the shared currency as the release showed Fed policy makers expect the American economy to rebound from a first-quarter slowdown, while indicating a June rate increase is unlikely. The gains come after the European Central Bank reaffirmed its commitment to quantitative easing.

CHINA: When it comes to spiking the global punch bowl, Zhou Xiaochuan doesn’t come close to central bankers in the U.S. or Europe. After central bank stimulus from the Federal Reserve and European Central Bank had a ripple effect in foreign financial markets, economists are advising investors not to expect a similar lift as Zhou’s People’s Bank of China cuts interest rates and encourages banks to lend. For one thing, China’s stimulus has so far proved weaker than that of the Fed or ECB. The stimulus which has been injected is also unlikely to reduce the cost of risk as much as similar actions did elsewhere. When the Fed cut its benchmark to about zero, for example, market borrowing costs also fell, helping the many global companies that borrow in dollars. By comparison, few international firms raise funds in the yuan, so the PBOC won’t lower the cost of equity as much worldwide.

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     29.763

Money Market Highlights
NIBOR (%)
O/N                                  53.6667
30 Days                           14.7283
90 Days                           15.6718
180 Days                         17.0153

LIBOR (%)
USD 1 Month                 0.1868
USD 2 Months               0.2324
USD 3 Months               0.2810
USD 6 Months               0.4155
USD 12 Months             0.7276

Benchmark Yields
Tenor     Maturity     Yield (%)
91d           06-Aug-15         11.57
182d         15-Oct-15          14.04
364d        05-May-16        15.21
2yr            27-Apr-17         13.78
3yr            29-Jun-19        13.70
5yr            13-Feb-20        13.61

Indicative Currency Exchange Rates
                          Bid       Offer
USDNG         196.00     199.50
EURUSD      1.0986       1.1188
GBPUSD       1.5392      1.5595
USDJPY        121.00      120.03
USDCHF       0.9347     0.9448
GBPEUR       1.3872      1.4077
USDZAR      11.8522     12.0564
JPYNGN      164.4000  164.5200
CHFNGN       215.03      216.72
EURNGN        N/A         N/A
GBPNGN         N/A         N/A
ZARNGN         N/A         N/A

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