A Review of the Nigerian Energy Industry

Financial market products & services update

Financial markets
Financial markets

23 June 2015, Sweetcrude, Houston – Local and international financial market products and services update.
NIGERIA: Nigerian President Muhammadu Buhari, who took office last month, said his government is facing severe financial strain from a Treasury that’s “virtually empty” and billions of dollars in debts. The government is under “so much pressure” that it’s unable to even regularly pay some state workers, Buhari told reporters on Monday in the capital, Abuja. “This is the bad management that we find ourselves in.” Buhari has yet to name a cabinet since being sworn in as president of Africa’s largest economy on May 29 after defeating Goodluck Jonathan in elections. He took over as a plunge in crude prices forced the government to scale back budgeted spending and devalue the Naira while foreign-currency reserves fell. The government relies on crude for about 70 percent of its income.

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: Some of last week’s gains already erased yesterday. Aug 2016s which traded at YTD low of 13.22% yield saw a sharp correction and closed at +49bps. Q3 bond auction calendar was released yesterday. Gross issuance unchanged from last quarter and only the 5 & 20year paper will be auctioned. Some demand was seen in bonds after the release of the calendar but short-lived. Last week’s FAAC meeting failed to hold with no details yet as to when they will meet. In the absence of this inflow, no support will be seen for O/N rates (which closed at 18%) till Thursday’s NGN253bn OMO maturity. Bill market saw demand on optimism of this maturity coming in. Average yield edged lower by 20bps. Money market long NGN54bn.

COMMODITIES: Oil prices fell on Tuesday on worries over a global glut, while surveys showing a contraction in manufacturing activity in China and Japan also dragged on market sentiment. An expected drawdown in U.S. crude stocks, however, put a floor under prices. Brent crude was down 5 cents at $63.29 a barrel as of 0651 GMT, after closing the previous session up 32 cents.

EUROPE: Eurozone leaders have broadly welcomed new proposals for Greek reforms amid hopes a deal can be struck within days to stop Greece defaulting on its debt. German Chancellor Angela Merkel said Greece’s latest offer constituted “some progress”. But she said more work was needed and “time is short”. Greece must repay a €1.6bn (£1.1bn) International Monetary Fund (IMF) loan by the end of the month. If it fails to do so, it risks crashing out of the euro and possibly the EU.

CHINA: China’s soft economic data belie the “broad-based recovery” that has taken place during the second quarter in world’s number two economy, the latest China Beige Book (CBB) report has claimed. The quarterly private-sector survey, which resembles the U.S. Federal Reserve’s Beige Book, found that China’s pickup in the second quarter was largely driven by a resurgence in the retail and real estate sectors.

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     29.008

Money Market Highlights
O/N                                  17.1000
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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