A Review of the Nigerian Energy Industry

Financial market products & services update

Financial markets.
Financial markets.

03 August 2015, Sweetcrude, Lagos – 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 still maintained at 196.00/197.00.

FIXED INCOME: Last week say quite some activity in the bonds market. There was some reversal in sentiments during the week as we saw bullish activities. The trend was however reversed at week close leaving week on week levels almost flat. With announcement of OMO auctions liquidity is gradually leaving the system, causing some weakness on the short dated bills. Two tenors were floated on Friday at the OMO window but stop rate of the longer tenored bill (286DTM) moved up from average 15.3% yield seen this week to 15.725%. This increased the general weakness already seen in the market. O/N rates closed at 7%.

COMMODITIES: Iran can boost oil production in one week after international sanctions are lifted, and OPEC’s refusal to accommodate Iran in export markets would result in lower crude prices, Oil Minister Bijan Namdar Zanganeh said. Production can increase by 500,000 barrels a day within a week after sanctions end and by 1 million barrels a day within a month following that, state-run Islamic Republic News Agency reported. Brent crude, the global benchmark, fell about 50 percent last year and dropped 0.7 percent to $51.83/bbl.

NIGERIA: The Central Bank of Nigeria (CBN) has said it may increase the list of items excluded for funding from the official foreign exchange (forex) market as it seeks to reduce pressure on the naira and preserve the country’s external reserves. CBN Governor, Mr. Godwin Ifeanyi Emefiele, said this during an exclusive interview with THISDAY in Lagos at the weekend. The policy, according to the central bank, was also designed to facilitate the resuscitation of domestic industries and improve employment generation. But some of the affected importers and members of the Lagos Chamber of Commerce and Industry (LCCI) have continued to kick against the policy.

US: Imagine there were a simple policy that would spur economic growth, lower gas prices and please international allies. This policy exists: removing the United States’ irrational and outdated ban on exporting domestically produced crude oil. A bill lifting the ban passed a Senate committee last week, a day after House Speaker John Boehner (R-Ohio) announced that he, too, supported bringing the country fully into the international oil market. Congress imposed the ban amid the oil shocks of the 1970s in a desperate move to tame gasoline prices. Lately, the situation has changed: U.S. crude oil production rocketed up 74 percent from 2008 through 2014. That has led to a glut here at home, where crude oil is selling at a discount relative to world prices. Yet the ban’s superficial logic still appears to hold some power: Lifting the export restrictions, one might imagine, would send more oil abroad, which would raise gasoline prices here and hurt the economy.

EUROPE: The Europe’s economy has been hit so hard by five years of crisis that 1.6 percent growth makes Germany look like a powerhouse and Spain can boast of being a job-creating machine with 23 percent unemployment. The tepid recovery is just fine with bond investors. They are charging Italy and Spain less than 2 percent to borrow for 10 years, compared with more than 7 percent at the height of the
crisis. Euro-area economic confidence reached a four-year high last month. But the cheaper oil, declining euro and European Central Bank money spurring an upturn in the economy haven’t answered key questions about the currency region’s future. Greece’s membership still hangs in the balance and a political backlash in both the richer north and poorer south makes steering the economy even harder.

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     31.365

Money Market Highlights
O/N                                   7.7500
30 Days                           12.9212
90 Days                           15.6979
180 Days                         16.7083

USD 1 Month                 0.1918
USD 2 Months               0.2495
USD 3 Months               0.3086
USD 6 Months               0.4899
USD 12 Months             0.8285

Benchmark Yields
Tenor     Maturity     Yield (%)
91d           29-Oct-15          14.01
182d         21-Jan-16         14.42
364d        02-Jun-16         14.53
2yr            27-Apr-17         14.81
3yr            29-Jun-19        14.93
5yr            13-Feb-20        14.71

Indicative Currency Exchange Rates
                         Bid         Offer
USDNG         196.50       199.50
EURUSD       1.0868      1.1070
GBPUSD       1.5489       1.5691
USDJPY        124.16       124.19
USDCHF       0.96136    0.9715
GBPEUR       1.4111        1.4315
USDZAR      12.6271      12.8305
JPYNGN      160.3597    160.4603
CHFNGN       204.99      206.68
EURNGN       217.24       219.60
GBPNGN        309.40     310.79
ZARNGN          14.69      16.61

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