A Review of the Nigerian Energy Industry

Financial market products & services update

Financial markets
Financial markets

13 July 2015, Sweetcrude, Lagos – Local and international financial market products and services update.

NIGERIA: The CBN has reiterated that its recent exclusion of 41 items from funding on the Nigerian Foreign Exchange Market (interbank and BDCs) would help to grow local industries. It also maintained that no economy is run by allocating forex for importation, saying that such a policy would only end up destroying infant industries in any nation. The CBN Director, Monetary Policy, Mr. Moses Tule, made these remarks at a Private Sector Dialogue on the new forex policy organised by the Lagos Chamber of Commerce and Industry (LCCI) in Lagos. Tule stressed that continuing with the previous forex regime would deplete the nation’s forex reserves further since oil prices as well as government revenue had declined. “The business of macro-economic management in any country, is the business of the fiscal authorities and the business of the monetary authorities. So, the two key agencies of macro-economic management must come together.“The implication is that the CBN must do its own duty of the job and that arm of government responsible for fiscal policy, in this case, the Federal Ministry of Finance, must do its own part. No economy is run by foreign exchange,” Tule insisted.

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: CBN tired to mop up more liquidity in the market, though with no sale at the end. These caused more sell off on the short end of the curve, with yields pushing up about 150bps. Bonds on the other hand saw some demand in the market, and the yields dropped about 13bps across the curve. O/N jumped to 12% on the back of the CRR debit and OMO auctions.

COMMODITIES: Brent recovers toward $58 after Euro Summit reaches unanimous deal on Greek aid. WTI mirrors Brent move as euro/dollar recovers to trade near Friday’s settle. Aug. Brent -83c at $57.90 at 8:35am London; agg volume 166% above 100-day avg; traded as low as $56.84 before Greek deal. Greece reaches agreement with creditors over reforms needed to start formal negotiations over a 3rd bailout program.

EU: Greek Prime Minister Alexis Tsipras surrendered to European demands for immediate action to qualify for up to 86 billion euros ($96 billion) of aid he needs to keep his country in the euro. After a six-month offensive against austerity succeeded only in derailing Greece’s economy and deepening its financial mess, there was no face-saving compromise on offer for Tsipras at a rancorous euro-area summit that ran for more than 17 hours. “Trust has to be rebuilt, the Greek authorities have to take on responsibility for what they agreed to,” German Chancellor Angela Merkel said after the meeting ended just before 9 a.m. in Brussels Monday. “It now hinges on step-by-step implementation of what we agreed.”

CHINA: China’s exports rose for the first time in four months in June, providing fresh evidence that growth is stabilizing ahead of gross domestic product data this week. Overseas shipments rose 2.1 percent from a year earlier in yuan value, the customs administration said in Beijing on Monday, exceeding the median estimate in a Bloomberg survey for 1.2 percent growth. Imports dropped 6.7 percent, narrowing from the fall of 18.1 percent previously reported in May, leaving a trade surplus of 284.2 billion yuan ($45.8 billion).

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     29.719

Money Market Highlights
O/N                                  13.7500
30 Days                           14.1487
90 Days                           16.1366
180 Days                         17.0163

USD 1 Month                 0.1860
USD 2 Months               0.2380
USD 3 Months               0.2858
USD 6 Months               0.4540
USD 12 Months             0.7627

Benchmark Yields
Tenor     Maturity     Yield (%)
91d           15-Oct-15           13.78
182d         07-Jan-16         13.12
364d        02-Jun-16         15.14
2yr            27-Apr-17         14.72
3yr            29-Jun-19        15.01
5yr            13-Feb-20        15.05

Indicative Currency Exchange Rates
                          Bid        Offer
USDNG         196.95      199.45
EURUSD       1.1012      1.1214
GBPUSD       1.5349      1.5551
USDJPY        122.17      122.20
USDCHF       0.93465   0.9448
GBPEUR       1.3801      1.4005
USDZAR      12.2929     12.4963
JPYNGN      162.9597   163.0603
CHFNGN       211.15      212.84
EURNGN       220.69    222.05
GBPNGN        306.99   308.39
ZARNGN          15.11      17.03

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