A Review of the Nigerian Energy Industry

Financial market products & services update

Financial markets
Financial markets

08 July 2015, Sweetcrude, Abuja – Local and international financial market products and services update.
FX: No significant change in the market as the two way quote FX market remains shut. Special auction funds remained at 195.95/196.95.

FIXED INCOME: We expect lackluster demand at today’s bill auction because there is no 364day paper on offer. Also the relatively small sizes on offer for the other two tenors should not cause a significant change to the stop rate. Bond market reversed losses on optimism of the N413.7bn bailout approved. Entire bond curve was well bid until some offshore accounts used the opportunity to offload risk on the long end. Money market was long N274bn yesterday as there was no OMO auction. This caused short dated bills to rally some more. O/N rates still unchanged at 8%.

COMMODITIES: Oil extended its slide from a 3-month low as investors eschewed risky assets amid speculations China’s efforts to stem an equity rout are failing. Iran, the 4th largest producer in the OPEC plans to boost crude exports and recapture market share when sanctions are lifted. WTI traded as low as $51.46/bbl while brent slid to $56/bbl.

NIGERIA: Nigeria will share $2.1 billion to federal, state and local governments to reduce a growing backlog of debts and restructure short-term loans as Africa’s biggest oil producer suffers declining revenues, the presidency said on Tuesday. Governors of Nigeria’s 36 states met President Muhammadu Buhari two weeks ago to request federal government support to offset a funding crisis amid debts including unpaid salaries totalling 658 billion naira. Special adviser to the President Femi Adesina said, however, that measures to deal with a debt crisis plaguing the states did not include any drawing from the balance of $2.078 billion in the oil savings Excess Crude Account. The finance ministry had said late on Monday that Nigeria would release 359.37 billion naira ($1.81 billion) of liquefied natural gas (LNG) revenues to help ease the debt backlog, while the accountant general said it would share out $1.7 billion from its oil savings pot, Excess Crude Account (ECA).

US: The Federal Reserve will delay raising U.S. interest rates until next year, a Morgan Stanley index shows. Greece’s struggle to stay in the euro currency union along with plunging prices for Chinese stocks and commodities globally
are all threatening to slow global economic growth. The International Monetary Fund on Tuesday reiterated its view that the Fed should wait until the first half of 2016 to act. The mix is driving a rally in Treasuries.

CHINA: China’s stock rout has reached a tipping point. Losses in Shanghai and Shenzhen spilled across Asia Wednesday, sending the region’s benchmark gauge toward its steepest drop in two years. The eight biggest Asian markets fell at least 1 percent, with Hong Kong shares heading for the biggest decline since the financial crisis. Gauges of equity volatility in the city and Tokyo surged. Even as the first three weeks of China’s stock slump wiped out $3.2 trillion in value, developments in the Greece crisis and the Federal Reserve’s latest prognostications took centre stage for many asset managers. That’s changing as the deepening rout forces investors to weigh what the losses mean for the global growth outlook.

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     29.548

Money Market Highlights
O/N                                   4.8933
30 Days                           13.3829
90 Days                           15.4080
180 Days                         16.9984

USD 1 Month                 0.1869
USD 2 Months               0.2350
USD 3 Months               0.2833
USD 6 Months               0.4446
USD 12 Months             0.7599

Benchmark Yields
Tenor     Maturity     Yield (%)
91d           24-Sep-15         13.92
182d         07-Jan-16         13.33
364d        02-Jun-16         14.29
2yr            27-Apr-17         14.76
3yr            29-Jun-19        15.00
5yr            13-Feb-20        14.98

Indicative Currency Exchange Rates
                          Bid        Offer
USDNG         196.95      199.45
EURUSD       1.0936      1.1140
GBPUSD       1.5325      1.5527
USDJPY        121.73      121.76
USDCHF       0.93805   0.9482
GBPEUR       1.3871      1.4075
USDZAR      12.4356     12.6390
JPYNGN      163.4597   163.5603
CHFNGN       210.15     211.84
EURNGN       219.03    220.39
GBPNGN        306.33   308.72
ZARNGN          14.91      16.84

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