A Review of the Nigerian Energy Industry

Financial market products & services update

Financial markets
Financial markets

08 June 2015, Sweetcrude, Houston – Local and international financial market products and services update.
NIGERIA: Nigeria’s new administration was given more time to inject life back into currency trading and avoid being cut from JPMorgan Chase & Co.’s emerging market bond indexes, tracked by more than $200 billion of funds. A decision on whether to remove Nigeria from JPMorgan’s GBI-EM indexes will be “finalized in the coming months” to give the government time to settle in, the New York-based lender said in a statement dated June 5. Africa’s largest economy has a 1.8 percent weighting in the gauge. “It is in no one’s interest to have Nigeria removed from the index,” Samir Gadio, the head of African strategy at Standard Chartered Plc in London, said in an e-mail on June 6. “From an investor standpoint, Nigeria is the highest-yielding diversifier in a GBI-EM context. That said, further normalization in FX market conditions will probably be needed to ensure long-term GBI-EM inclusion.”

FIXED INCOME: Trading in the bill market on Friday was bearish on the back of the OMO by the CBN. Only NGN31.88bn was mopped up even though liquidity is still healthy at sub NGN300bn. Signal is that CBN is looking for lower discount rates as rest of the NGN92.74bn worth of bids missed by just 2bps. (13.73% discount vs 13.75% discount at last OMO). Better tone in bonds on Friday despite another weak open. Flows by about midday was skewed to the buyers. Whispers are there was a client demand on the July 2034s this then caused a ripple effect across the bond curve. Expect some demand to filter in this week as street positions ahead of the bond auction on the 17th. O/N rates closed at 8%.

FX: The Central bank recently appreciated its official rate by 5 kobo on the bid and offer. Bringing the new rates to 195.95/196.95 from 196/197. This hasn’t had any significant impact on market demand/outstanding balance in the market. CBN still the major supplier of FX in the interbank market with an estimated $207mio sold at last week’s special auction, representing a slight drop of about $137mio from the previous week’s sales.
COMMODITIES: Brent Crude Futures contract for July settlement trades at $63.29/bbl, down 2 cts, on London-based ICE Futures Europe exchange.

US: The dollar slid after a French official said U.S. President Barack Obama told delegates at a Group-of-Seven summit on Sunday that the “strong dollar posed a problem.” The greenback reversed an earlier advance against the euro and fell from Friday’s 13-year high against the yen as the French government official made the comments to reporters on Monday. The U.S. currency has gained 19 percent in the past year, the best performer among 10 developed-nation peers tracked by Bloomberg Correlation-Weighted Indexes, amid speculation the Federal Reserve is moving closer to its first interest-rate increase since 2006.

CHINA: China’s exports fell for a third month in May, while imports slumped the most in three months, underscoring a sluggish domestic environment in need of more monetary policy support. Overseas shipments fell 2.8 percent from a year earlier in yuan value, the customs administration said in Beijing on Monday. Imports slid 18.1 percent, leaving a trade surplus of 366.8 billion yuan ($59.1 billion). U.S. demand helped prevent a deeper decline in shipments abroad.

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     29.343

Money Market Highlights
O/N                                   9.2100
30 Days                           14.7338
90 Days                           16.0117
180 Days                         17.2179

USD 1 Month                 0.1830
USD 2 Months               0.2315
USD 3 Months               0.2812
USD 6 Months               0.4239
USD 12 Months             0.7492

Benchmark Yields
Tenor     Maturity     Yield (%)
91d           03-Sep-15         11.51
182d         03-Dec-15        13.46
364d        02-Jun-16        14.44
2yr            27-Apr-17         13.84
3yr            29-Jun-19        13.86
5yr            13-Feb-20        13.86

Indicative Currency Exchange Rates
                          Bid        Offer
USDNG         196.00      199.50
EURUSD      1.1028       1.123
GBPUSD       1.5156       1.5358
USDJPY        125.50      125.53
USDCHF       0.93515    0.9453
GBPEUR       1.3607       1.3811
USDZAR      12.4809      12.6843
JPYNGN      158.5197    158.6203
CHFNGN       212.59      214.28
EURNGN       221.59      222.95
GBPNGN        309.16     310.55
ZARNGN          15.90       17.83

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