A Review of the Nigerian Energy Industry

Financial market products & services update

Financial markets
Financial markets

15 July 2015, Sweetcrude, Lagos – Local and international financial market products and services update.
NIGERIA: The Debt Management Office (DMO) has put the total value of bonds issued by states to fund infrastructural development in the past 10 years at N600 billion. Statistics released by the DMO’s Director-General, Dr. Abraham Nwankwo, and obtained by the News Agency of Nigeria (NAN) revealed that the amount was raised between 2005 and 2014. Nwankwo also said the N600 billion was used by the state governments to refinance existing loans. He said that Nigerian corporate institutions, following the development of domestic bond market between 2005 and 2014 had issued debt instruments worth N223 billion. “Following the development of domestic bond market between 2005 and 2014 Nigerian corporate institutions have issued debt instruments of about N223 billion, thereby contributing to the development of the real sector,’’ Nwankwo said. He said the market also attracted supranational issuers of debt securities such as the International Finance Corporation (IFC), a member of the World Bank Group and Africa Development Bank.

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: Shortened week because of the eid holidays on Friday & Monday next week. Expect the general weakness to persist heading into the holidays. Bond yields traded up anywhere from 10 – 40bps before finally closing an average +18bps. Uncertainty to remain as pertinent details of the restructuring still unknown but bond auction today will give a little more direction as new levels will be set. With further decline in system liquidity to sub- NGN150billion, yields on bills moved higher today (+33bps). O/N rates closed unchanged at 14%.

COMMODITIES: Brent for August settlement, which expires Thursday, was down 37 cents at $58.14 a barrel on the London-based ICE Futures Europe exchange. The European benchmark crude was at a premium of $5.34 to WTI. The more-active September contract dropped 36 cents to $58.15. Restrictions on Iran will remain in place at least until the United Nations reports on the country’s compliance with the deal in December, diplomats involved in the talks said Tuesday.

US: Janet Yellen has work to do if she’s going to convince the holdouts in the bond market that the Federal Reserve will raise U.S. interest rates before year-end.The central bank chair is scheduled to address U.S. lawmakers Wednesday and Thursday in Washington, after saying last week it will probably be appropriate to increase borrowing costs “later this year.” A Morgan Stanley index based on futures trading shows the Fed won’t act until early 2016. The central bank will meet four more times in 2015. While turmoil in Greece and China has stabilized, the Fed’s preferred inflation gauge rose just 0.2 percent in May from the year before, and it’s been below the 2 percent target for three years. The central bank has said it needs to be “reasonably confident” inflation will approach its target before increasing borrowing costs.

CHINA: China’s economic growth proved resilient in the second quarter as policy makers stepped up support and a stock market boom — since soured — spurred services. Gross domestic product rose 7 percent in the three months through June from a year earlier, the National Bureau of Statistics said Wednesday, unchanged from the first quarter and beating economists’ estimates for 6.8 percent. Industrial output in June rose 6.8 percent, while fixed-asset investment increased 11.4 percent in the first half.

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                           16.9166
180 Days                         17.6935

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           13.75
182d         07-Jan-16         13.15
364d        02-Jun-16         15.14
2yr            27-Apr-17         14.89
3yr            29-Jun-19        15.17
5yr            13-Feb-20        15.16

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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