A Review of the Nigerian Energy Industry

Financial market products & services update

Financial markets
Financial markets

29 June 2015, Sweetcrude, Houston – Local and international financial market products and services update.
NIGERIA: The Federal Government has incurred a total sum of N56.784bn in petrol subsidy arrears since Muhammadu Buhari took over as President of the country on May 29, this year. According to data from the Petroleum Products Pricing Regulatory Agency, the country is said to be incurring petrol subsidy arrears to the tune of N47.32 per day on one litre of petrol. Between May 29 and now, the current government has spent 30 days in office. Based on a daily petrol consumption figure of 40 million litres, the total subsidy cost on the product for the 30 days the Buhari government has been in power amounts to N56.784bn at N47.32 per litre.

FIXED INCOME: Trading in the bills market overall remained bearish as street reacted again to OMO auction, steering yields higher on the belly and long end of the bill curve. Short end of the bill curve (40days and below) saw decent demand with FAAC inflow of N217.67bn hitting the system. Total money market liquidity now in excess of NGN300bn. N89.88bn of 181day paper was mopped up at 14.70% yield via OMOs. Bond market reversed some of the losses seen. Some client interest seen and it fuelled the demand seen from about midday. O/N rates closed at 8%.

COMMODITIES: Currently, WTI trades -1.43% lower at 58.76, wavering below 59 handle. Oil prices trade extends declines largely on the back of looming Greek debt woes and rumour of a possible Grexit continue to dampen investors’ sentiment and fuel risk-off moods, weighing on riskier assets such as oil.

EUROPE: The Greek government has confirmed that banks will be closed all week, after a decision by the European Central Bank not to extend emergency funding. In a decree, it cited the “extremely urgent” need to protect the financial system due to the lack of liquidity. Cash withdrawals will be limited to €60 (£42; $66) a day for this period, the decree says. Athens is due to make a €1.6bn payment to the IMF on Tuesday – the same day that its current bailout expires. In reaction to the crisis, the London, Paris and Frankfurt stock markets fell sharply in early trading on Monday, following similar falls in Asia. The euro lost 2% of its value against the US dollar. Government borrowing costs in Italy and Spain, two of the eurozone’s weaker economies, have also risen.

CHINA: China’s central bank cut lending rates for the fourth time since November and trimmed the amount of cash that some banks must hold as reserves. The moves came as it stepping up its efforts to support an economy that is headed for its poorest performance in 25 years. Saturday’s combined easing highlights Beijing’s concerns that money is not flowing to some of the most-needed sectors in the economy and that stubbornly high borrowing costs that could fuel bankruptcies and job losses. The last time the central bank simultaneously cut interest rates and reserve requirements was at the height of the global financial crisis in late 2008.

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     29.029

Money Market Highlights
O/N                                   8.6250
30 Days                           15.0964
90 Days                           16.1079
180 Days                         17.2538

USD 1 Month                 0.1866
USD 2 Months               0.2345
USD 3 Months               0.2818
USD 6 Months               0.4464
USD 12 Months             0.7765

Benchmark Yields
Tenor     Maturity     Yield (%)
91d           24-Sep-15         12.06
182d         17-Dec-15         13.24
364d        02-Jun-16         14.22
2yr            27-Apr-17         14.21
3yr            29-Jun-19        14.29
5yr            13-Feb-20        14.57

Indicative Currency Exchange Rates
                          Bid        Offer
USDNG         196.00      199.40
EURUSD       1.0995      1.1197
GBPUSD       1.5600      1.5802
USDJPY        122.87      122.90
USDCHF       0.93115    0.9413
GBPEUR       1.4049      1.4253
USDZAR      12.1507     12.3541
JPYNGN      161.8797   161.9803
CHFNGN       213.02     214.71
EURNGN       222.96    224.32
GBPNGN        306.63   308.02
ZARNGN          15.09      17.01

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