A Review of the Nigerian Energy Industry

Financial market products & services update

Financial markets.
Financial markets.

22 June 2015, Sweetcrude, Houston – Local and international financial market products and services update.

NIGERIA:  Nigeria’s four oil refineries will resume production in July, a spokesman for the state-owned Nigerian National Petroleum Corporation (NNPC) said on Friday. Spokesman Ohi Alegbe said the two refineries in Port Harcourt would begin operations after turnaround maintenance, followed by those in Warri and Kaduna. “Even when the refineries work at full capacity, they can only produce around 19M litres of petrol per day,” he said. “There will still be a shortfall of about 21M litres,” he said, pointing out that Nigeria consumes about 40M litres of petrol per day. Nigeria, one of Africa’s top two oil producers, is forced to import most of its petrol products due to its ailing refinery system, which generally runs well below capacity, sometimes at just 20%, due to neglect and pipeline sabotage. Major cities in Nigeria are recovering from a gasoline shortage despite the end of a fuel distribution strike as fuel marketers, who are still not importing due to money owed them, have agreed to distribute fuel brought in by the state oil company, NNPC.

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. Last week’s average daily turnover was estimated at $124.6m, up from $96.4m the previous week.

FIXED INCOME: Most of the demand seen on Friday was from locals looking to cover shorts ahead of the CBN meeting. Yields inched slightly higher after that but by afternoon some renewed interest in the Aug 2016s filtered into the market and rest of the curve rallied again to close. Bills were a mixed bag. Money market long N73bn causing O/N rates to shoot up to 20%. With status quo maintained at the CBN meeting, we expect the bond market to erase some of the gains this week. Bill auction on Wednesday this week – on offer is N31.19bn 91day, N39.33bn 182day and N50bn 364day.

COMMODITIES: WTI futures fell 17 cents to $59.97 a barrel on the New York Mercantile Exchange in the period covered by the CFTC report and settled at $59.61 on June 19. The grade lost 6 cents to $59.55 at 11:50 a.m. Singapore time Monday. Saudi Arabia, OPEC’s biggest member, is ready to produce more oil if demand rises, Oil Minister Ali-Al Naimi said June 18. It has 1.5 million to 2 million barrels a day of spare capacity, he said.

EUROPE: European banks are better positioned to weather a Greek euro exit because their financial strength has improved in the past three years, while funding markets are less likely to freeze, Moody’s Investors Service said. The risk of restricted market liquidity has diminished because gradual economic growth in the region has bolstered investor confidence, according to a report on Monday from the credit-rating company. Banks in periphery European countries such as Cyprus, Ireland, Italy, Portugal and Spain remain the most vulnerable to a funding shock due to weaker balance sheets.“Broad improvement in euro area banks’ financial conditions and an associated stabilization in the region’s economic environment has made banks more resilient to external shocks,” said Sean Marion, an analyst at Moody’s.

CHINA: Asia-focused hedge funds beat equity markets in May with profitable China bets just as the nation’s share market rally began to slow.Pine River Capital Management, Springs Capital (Hong Kong) and Legends Asset Management were among those whose returns last month outperformed the MSCI Asia-Pacific Index, which fell 1.3%, its first monthly decline this year.

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                                  34.5833
30 Days                           15.7996
90 Days                           16.6807
180 Days                         17.6864

USD 1 Month                 0.1870
USD 2 Months               0.2338
USD 3 Months               0.2813
USD 6 Months               0.4436
USD 12 Months             0.7666

Benchmark Yields
Tenor     Maturity     Yield (%)
91d           24-Sep-15         12.75
182d         17-Dec-15         13.25
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   162.0503
CHFNGN       213.02      214.71
EURNGN       222.96      224.32
GBPNGN        306.63     308.02
ZARNGN          15.09       17.01

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