A Review of the Nigerian Energy Industry

Financial market products & services update

Financial markets.
Financial markets.

31 July 2015, Sweetcrude, Lagos – Local and international financial market products and services update.
NIGERIA: THE Central Bank of Nigeria (CBN) has described the nation’s economy as “a volcano waiting to erupt” had the foreign exchange pressure been left unchecked. Its Director of Monetary Policy Department, Moses Tule, disclosed this yesterday in Calabar, Cross River State, during the opening session of the two-day seminar for finance correspondents and business editors. Tule, in a lecture titled, “Crude Oil Volatility: Implications for External Reserves and Exchange Rate Management in Nigeria,” said the recent policy on foreign exchange was an edge against the imminent disaster to the country’s economy. “A rapid fall in oil prices threatens Nigeria’s macro-economic stability because foreign exchange earnings, government revenue and domestic money supply are largely dependent on the receipts from crude oil exports,” he said.

FIXED INCOME: More demand seen in bonds. Positioning of traders still seems light but small client flows moving bonds easily especially on the Feb 2020s and July 2034s as everyone scrambles to cover once lifted. System liquidity remains healthy on the back of OMO maturity of approximately N103bn. The CBN announced an OMO auction, N83.8bn of 301 day bill was sold at a stop-rate of 13.70% discount (15.44% yield). Trading in the bills market remained bullish as liquidity buoyed demand, pushing yields 28bps lower on average – demand remains weighted across the short dated maturities. O/N rates closed at 8%.

USA: The US economy grew at an annualised pace of 2.3% in the three months to June, official figures have shown. The figure – the first estimate of growth in the second quarter – followed an upwardly revised growth rate of 0.6% in the first three months of the year. The Commerce Department said growth was boosted by increased consumer spending and cheaper fuel prices. Analysts said the figure could make the US Federal Reserve more likely to raise interest rates in September. The 2.3% annualised growth rate is equivalent to 0.6% growth quarter-on-quarter, as measured in most other countries. For example, on Tuesday, official figures showed that the UK economy grew by an estimated 0.7% in the April-to-June period from the previous quarter.

EUROPE: The International Monetary Fund (IMF) is very wary of any financial contribution to a third Greek bailout. The implication of remarks by an IMF official is that it is very unlikely to provide funds at the first stage. The fund could however join in later, provided both the eurozone and Athens take steps to address IMF concerns. The problem for the IMF is that its staff believe the elements so far agreed are not enough to make the Greek government’s debt sustainable. Negotiations are underway and the IMF is involved. But its staff think the eurozone governments need to give Greece debt relief.

COMMODITIES: WTI crude futures fell slightly on Thursday reversing territory following a late sell-off, as energy traders reacted to the long-term ramifications of an unexpected supply draw and indications that Saudi Arabia could curtail production one session earlier. On the New York Mercantile Exchange, WTI crude for September delivery traded between $48.35 and $49.34 a barrel before closing at $48.58, down 0.23 or 0.46%. Texas Long Sweet futures have now closed under $50 a barrel in eight consecutive sessions. Previously, U.S. crude futures did not drop below the key technical level for a period of four months dating back to early-April. WTI crude futures are down by approximately 20% over the last month.

Macro Economic Indicators
Inflation rate (YoY) for Nov., 2014                   9.20%
Monetary Policy Rate current                          13.00%
FX Reserve (Bn $) as at January 09 2015     30.270

Money Market Highlights
O/N                                   5.9583
30 Days                           13.1711
90 Days                           15.9565
180 Days                         16.6520

USD 1 Month                 0.1885
USD 2 Months               0.2443
USD 3 Months               0.3001
USD 6 Months               0.4799
USD 12 Months             0.8136

Benchmark Yields
Tenor     Maturity     Yield (%)
91d           29-Oct-15          13.81
182d         21-Jan-16         13.86
364d        02-Jun-16         14.49
2yr            27-Apr-17         14.77
3yr            29-Jun-19        14.75
5yr            13-Feb-20        14.48

Indicative Currency Exchange Rates
                         Bid        Offer
USDNG         196.00      199.50
EURUSD       1.0826     1.1028
GBPUSD       1.5461      1.5663
USDJPY        123.63      123.66
USDCHF       0.96165   0.9718
GBPEUR       1.4139      1.4343
USDZAR      12.6674     12.8708
JPYNGN      159.5697   159.6708
CHFNGN       207.38      209.07
EURNGN       218.24    219.60
GBPNGN        311.16     312.57
ZARNGN          15.06      16.98

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