A Review of the Nigerian Energy Industry

Financial market products & services update

Financial markets.
Financial markets.

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

NIGERIA: Nigerian President Muhammadu Buhari replaced the heads of the army, navy and air force on Monday as the country endures the worst period of violence by Islamist insurgents since he came to power six weeks ago. Major-General Abayomi Gabriel Olonishakin will take over as Chief of Defence Staff, Major-General T.Y. Buratai will be the next Chief of Army Staff, and Babagana Monguno, a former major-general, was named as National Security Adviser, Femi Adesina, a spokesman for Buhari, said in a statement. Attacks by militants have intensified in recent weeks. At least 14 people were killed on Saturday by suspected Boko Haram fighters in the northeast. Bombings in the cities of Jos and Zaria killed nearly 70 people in the past 10 days. The new chiefs “will inherit a lot of problems: the insurgency in the north, mob robberies in the southwest and criminal violence in the Niger Delta,” said Freedom Onuoha, a research fellow at the National Defence College in the capital, Abuja.

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: Federal Government has approved the restructuring of states commercial bank loans outstanding in the books of banks into 20-year FGN Bonds as part of the initiatives to restore fiscal stability to the states. Whispers of this had partially fuelled the selloff seen in bonds. With the information now official, we expect more pressure today on bonds even though specifics on how this will be done is unknown. In bills, the sell pressure was weighted on the short end of the curve (30 day and below), with yields moving higher by an average of 65bps. O/N rates moved higher to close at 14%. Money market long only about N167bn.

COMMODITIES: Oil extended declines as Iran, once OPEC’s second-biggest producer, reached a deal with world powers over its nuclear program, raising speculation it will increase crude shipments into an oversupplied market. WTI, the U.S. benchmark, dropped as much as 2.5 percent. WTI fell as much as $1.29 to $50.91 a barrel on the New York Mercantile Exchange. Brent, the global benchmark, fell as much as 2.1 percent to $56.61 a barrel on the ICE Futures Europe exchange.

US: Janet Yellen is reminding the bond market that 2015 will include at least one interest-rate increase. After Treasuries posted a four-day rally through July 8 on refuge demand linked to unsolved Greek bailout talks and plunging Chinese stocks, U.S. debt reversed direction. The Fed chair’s remarks then helped extend the biggest two-day rout since 2013, along with improved chances of a Greek solution and a rebound in China’s equities, which cooled concern of a meltdown for the world’s second largest economy. Yellen said she sees receding headwinds for the U.S. economy, citing reduced influence from the strong dollar and lower oil prices.

CHINA: China is considering allowing another 1 trillion yuan ($161 billion) of local government debt swaps, according to people familiar with the matter. The plan is yet to be finalized because the Ministry of Finance needs to discuss it with the National People’s Congress and seek State Council approval, the people said Tuesday, asking not to be named because the talks are private. The new quotas will be in addition to the 2 trillion yuan already granted as part of a program to convert high-cost existing debt maturing this year into low-yielding municipal bonds. Local authorities have 1.86 trillion yuan of debt that matures this year, as well as a further 919.3 billion yuan in contingent liabilities, according to a government audit report based on data as of June 2013.

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                           14.1687
90 Days                           15.9166
180 Days                         16.6935

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         14.88
3yr            29-Jun-19        15.14
5yr            13-Feb-20        15.15

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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