A Review of the Nigerian Energy Industry

Financial market products & services update

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

27 May 2015, Sweetcrude, Houston – Local and international financial market products and services update.
NIGERIA: The International Monetary Fund (IMF) has pointed out that dollarisation, if left unchecked will remain an important challenge to policymakers in Nigeria and other African countries. According to the multilateral agency, dollarisation constrains the capacity of monetary authorities to act as a lender of last resort, hampers banks’ liquidity management and weakens the stability of the financial sector. The Fund also noted that dollarisation may amplify the impact of exchange rate movements on banks’ balance sheets, thereby increasing the risk of contractionary effects and bank failures.

FIXED INCOME: Tbill market traded a bit heavy following the OMO auction announcement yesterday. Bonds equally saw better sellers overall. Some pockets of buying on the June 2019s at open but gains were erased by close. Few clients (offshore and local) interested in offloading risk caused the sell-off seen across the bond curve but regardless it was a quiet day. No sale at yesterday’s OMO auction even though money market opened NGN329bn long. Whispers are that the subscription level was quite low. O/N rates closed at 10%.

COMMODITIES: WTI oil futures on the Nymex bounced-back sharply from fresh four week lows reached on Tuesday amid broad USD correction as markets now turn their focus to stockpiles data, which may show a fourth straight weekly fall. Currently, WTI trades 1.09% higher at 58.66, supported above 58 handle. Oil prices rebounding from Tuesday’s steep losses, with traders waiting for the weekly update on US crude reserves.
USA: Consecutive gains in orders for capital equipment signal American factories, and the economy, are starting to crawl out of a first-quarter slump. An index that is a proxy for future corporate spending — bookings for non-military capital goods excluding aircraft — advanced 1 percent in April after rising 1.5 percent the prior month, according to Commerce Department data issued Tuesday in Washington. Other reports showed the housing market is gaining traction and consumers are feeling a little more confident.

CHINA: The US has long suggested that China has manipulated the value of the Yuan to boost its exports. Undervaluation has been a problem in the past, says the IMF in a statement, but this is no longer the case. Substantial “appreciation over the past year has brought the exchange rate to a level that is no longer undervalued”, it says. The IMF says China should focus on creating full exchange rate flexibility so that the value of the Yuan adjusts as the country grows.

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     29.669

Money Market Highlights
O/N                                  10.8333
30 Days                           15.0437
90 Days                           16.2397
180 Days                         17.4504

USD 1 Month                 0.1863
USD 2 Months               0.2346
USD 3 Months               0.2859
USD 6 Months               0.4250
USD 12 Months             0.7569

Benchmark Yields
Tenor     Maturity     Yield (%)
91d           27-Aug-15         11.73
182d         03-Dec-15        13.83
364d        05-May-16        14.98
2yr            27-Apr-17         13.82
3yr            29-Jun-19        13.92
5yr            13-Feb-20        13.88

Indicative Currency Exchange Rates
                          Bid        Offer
USDNG         196.00      199.50
EURUSD      1.0814       1.1016
GBPUSD       1.5317       1.5519
USDJPY        122.98       123.01
USDCHF       0.94295   0.9531
GBPEUR       1.4024      1.4228
USDZAR      11.9304     12.1338
JPYNGN      161.7497  161.8503
CHFNGN       212.59      214.28
EURNGN       221.59      222.95
GBPNGN        309.16     310.55
ZARNGN          15.90        17.83

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