A Review of the Nigerian Energy Industry

Financial market products & services update

Financial markets
Financial markets

18 June 2015, Sweetcrude, Houston – Local and international financial market products and services update.
NIGERIA: The World Bank has said that Nigeria and other developing countries will face a series of tough challenges in 2015. These challenges include the looming prospect of higher borrowing costs as they adapt to a new era of low prices for oil and other key commodities. This, according to the World Bank Group’s latest Global Economic Prospects (GEP) report released recently, would resulting in a fourth consecutive year of disappointing economic growth this year. As a result, developing countries are now projected to grow by 4.4 percent this year, with a likely rise to 5.2 percent in 2016, and 5.4 percent in 2017. In Sub-Saharan Africa, low oil prices have considerably reduced growth in commodity-exporting countries (Angola, Nigeria), and have also slowed activity in non-oil sectors, it stated.

FX: No significant change in the market as the two way quote FX market remains shut. Special auction funds filled still at 195.90/196.90.

FIXED INCOME: Bond auction prints at 14.429% (+58bps) on Feb 2020s, 13.5% (+2bps) on March 2024s and 14.429% (+37bps) on July 2034s. This came out after the trading session had closed. Major surprise was on the March 2024s. O/N rates inched slightly higher to close at 14.5% with money market long approx NGN100bn. In secondary trading, the bearish sentiment had continued throughout the day because of auction jitters.

COMMODITIES: U.S. crude pared losses to settle down 5 cents at $59.92 on Wednesday as the dollar weakened following the U.S. Federal Reserve’s decision to leave its benchmark interest rate unchanged. Crude oil and refined products futures turned lower earlier on Wednesday in volatile trading after government data showed a surprise gasoline inventory build last week, even as production eased.

US: It would be the first increase since the rate was cut to near zero during the 2008 financial crisis. However, the bank said conditions in the labour market and inflation did not yet warrant an increase. In a press conference the Fed chair Janet Yellen said that “most [policy-makers] are anticipating a rate increase this year”. She added that once rates started to rise, any increases would be gradual. The US central bank is trying to find a balance between giving clear guidance to the markets about what will prompt a rise, while not restricting its freedom to react to new economic data.

EUROPE: Greece has a “political and moral duty” to reach an agreement with creditors over its debt crisis, Finance Minister Yanis Varoufakis has said. But he said Thursday’s meeting of euro zone finance ministers was unlikely to bring an immediate solution. In return for more funding, creditors want further reforms from Greece. But the ruling Syriza party is resisting those demands and, with talks deadlocked, fears are growing that Greece may default on its debts. The European Commission, the European Central Bank (ECB) and the International Monetary Fund (IMF) could extend fresh finance, but are insisting on reform and further austerity measures.

Macro Economic Indicators
Inflation rate (YoY) for Nov., 2014                   9.00%
Monetary Policy Rate current                          13.00%
FX Reserve (Bn $) as at January 09 2015     29.038

Money Market Highlights
O/N                                  15.1000
30 Days                           15.9685
90 Days                           16.8676
180 Days                         17.6790

USD 1 Month                 0.1875
USD 2 Months               0.2365
USD 3 Months               0.2857
USD 6 Months               0.4521
USD 12 Months             0.7914

Benchmark Yields
Tenor     Maturity     Yield (%)
91d           24-Sep-15         13.06
182d         17-Dec-15         13.46
364d        02-Jun-16         14.24
2yr            27-Apr-17         13.94
3yr            29-Jun-19        14.09
5yr            13-Feb-20        14.09

Indicative Currency Exchange Rates
                          Bid        Offer
USDNG         196.00      199.40
EURUSD       1.1270       1.1472
GBPUSD       1.5787      1.5989
USDJPY        122.83      122.86
USDCHF       0.91415    0.9243
GBPEUR       1.3870      1.4074
USDZAR      12.0997    12.3031
JPYNGN      161.9497   160.0503
CHFNGN       213.02      214.71
EURNGN       222.96      224.32
GBPNGN        306.63     308.02
ZARNGN          15.09       17.01

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