A Review of the Nigerian Energy Industry

Financial products & services update

Financial markets
Financial markets

10 August 2015, Sweetcrude, Lagos – Local and international financial market products and services update.
NIGERIA: A former Deputy Governor of the Central Bank of Nigeria (CBN), Prof. Kingsley Chiedu Moghalu, has advised global economic players, investors and capital allocators not to fret over Nigeria’s delayed cabinet appointments. Moghalu stated this in a report titled: “Buhari’s Slow start- Why Nigeria’s Economic Horizon Will Clear,” obtained at the weekend. He explained that when Buhari and his government settle into their stride in the fourth quarter of 2015, “I believe it will be well worth the wait,” adding that investors would be certain of serious-minded governance and zero tolerance for corruption. He gave the advice in an article published the Official Monetary and Financial Institutions Forum (OMFIF) bulletin. Moghalu is currently a member of the Advisory Board of the OMFIF, a London-based network of some of the world’s largest asset management and investment firms, central banks and economic policymakers.

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: We opened slightly weaker in bonds before some local demand trickled in on Friday. Offshore flow that came in early trading was met by the demand and had little impact in pushing bond yields higher. Eventually, some late sales on the June 19s caused it to close +4bps but overall, other bonds closed firm. Bond auction this Wednesday with N40bn being offered on the Feb 2020s and N30bn on July 2034s. Money market long only N25bn. Trading in the bills market remained bearish off tighter system liquidity. O/N rates closed at 50%.

COMMODITIES: Oil traded near the lowest level in almost five months in New York as a rebound in U.S. drilling signaled production is withstanding the slump in prices. Brent for September settlement lost as much as 37 cents, or 0.8 percent, to $48.24 a barrel on the London-based ICE Futures Europe exchange.

US: The number of active rigs in the U.S. rose for a third week, adding to concerns about a glut that has caused oil to fall more than 25 percent from its high this year. U.S. payrolls reports Friday showed continued expansion, reinforcing bets on the Fed raising borrowing costs in September. Traders are pricing in a 56 percent probability that the Fed will raise borrowing costs in September, based on the assumption that the effective fed funds rate will average 0.375 percent after the first increase. That’s up from a 38 percent probability a week ago.

CHINA: China’s leaders are increasingly relying on the central bank to help implement government programs aimed at shoring up growth, in an adaptation of the quantitative easing policies executed by counterparts abroad. Rather than bankroll projects directly, the People’s Bank of China is pumping funds into state lenders known as policy banks to finance government-backed programs. Instead of buying shares to prop up a faltering stock market, it’s aiding a government fund that’s seeking to stabilize prices. And instead of purchasing municipal bonds in the market, it’s accepting such notes as collateral and encouraging banks to buy the debt.

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     31.522

Money Market Highlights
O/N                                  49.3333
30 Days                           16.4673
90 Days                           17.3932
180 Days                         18.3545

USD 1 Month                 0.1912
USD 2 Months               0.2554
USD 3 Months               0.3116
USD 6 Months               0.5100
USD 12 Months             0.8358

Benchmark Yields
Tenor     Maturity     Yield (%)
91d           12-Nov-15         15.29
182d         04-Feb-16        14.84
364d        04-Aug-16         15.95
2yr            27-Apr-17         15.31
3yr            29-Jun-19        15.55
5yr            13-Feb-20        15.46

Indicative Currency Exchange Rates
                         Bid         Offer
USDNG         197.00       199.50
EURUSD       1.0838      1.1040
GBPUSD       1.5365       1.5567
USDJPY        124.73       124.76
USDCHF       0.97895    0.9891
GBPEUR       1.4037        1.4241
USDZAR      12.6041      12.8075
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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