A Review of the Nigerian Energy Industry

Financial market products & services update

Financial markets
Financial markets

17 August 2015, Sweetcrude, Lagos – Local and international financial market products and services update.
NIGERIA: The Federal Airports Authority of Nigeria, FAAN, has given all its debtors a seven – day final demand notice to settle their indebtedness on or before August 24. FAAN warned that at the expiration of this notice, the Authority would take all necessary measures to recover these debts in line with a presidential directive. This is contained in a statement signed by its General Manager, Corporate Affairs, Mr Yakubu Dati. The statement said that all the debtors had earlier been communicated with details of their indebtedness to the aviation Authority. It advised affected debtors who were in doubt to reach the relevant credit control office at its headquarters to reconcile their accounts. FAAN said that the debt recovery drive was to enable the Authority to meet its responsibilities, within the burden of these huge debts, as a self-sustaining organisation.

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: O/N rates quoted within the 20-25% range. Bill yields moved higher by an average of 20bps as liquidity conditions remain poor because of bond funding. Bonds saw some demand trickling in even though we started out extremely quiet. Most of the demand seen was on the March 2024s but offshore seller seen on the short end of the bond curve. There is a Bill auction this Wednesday. On offer is N32.4bn 91day and N30bn 182day (no 364day bill at this auction). Expect the bills market to remain under pressure while bonds could see demand trickling in bits this week.

COMMODITIES: Oil prices fell to near six-year lows on Monday as Japan’s economy contracted and producers in the United States added drilling rigs for a fourth straight week despite a recent rout in prices. Japan’s economy, the second biggest in Asia and No.3 in the world, shrank in the second quarter from a year earlier, adding to fears that slowdowns in Asia’s biggest economies will weigh on oil demand. U.S. crude CLc1, or West Texas Intermediate (WTI), for September delivery was trading 58 cents lower at $41.92 a barrel at 0712 GMT (0312 EDT), close to more than six-year lows.

EUROPE: Waiting too long to raise interest rates risks undermining the UK’s recovery, Bank of England policymaker Kristin Forbes has warned. Monetary Policy Committee member Ms Forbes said a rate hike took between one and two years to take full effect. As a result, rates would need to rise “well before” inflation hit the Bank’s 2% target, she said. “Waiting too long would risk undermining the recovery – especially if interest rates then need to be increased faster than the gradual path which we expect,” she warned.

CHINA: China’s central bank is “fully capable” of stabilizing the Yuan through currency intervention, Ma Jun, chief economist at the People’s Bank of China, stated. “When necessary, the central bank is fully capable of stabilizing the exchange rate by directly intervening in the foreign exchange market”. On Tuesday, the central bank shocked global markets by devaluing the Yuan by nearly 2 percent, a move it billed as a free-market reform but which some suspect could be the beginning of a long-term currency slide to spur exports. The Yuan weakened further on Wednesday, hitting a four-year low, as the central bank was suspected of intervening via state banks to support the Yuan.

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     31.619

Money Market Highlights
O/N                                 28.1250
30 Days                           18.6676
90 Days                           20.7169
180 Days                         21.8245

USD 1 Month                 0.1996
USD 2 Months               0.2657
USD 3 Months               0.3245
USD 6 Months               0.5249
USD 12 Months             0.8441

Benchmark Yields
Tenor     Maturity     Yield (%)
91d           12-Nov-15         14.65
182d         04-Feb-16        15.02
364d        04-Aug-16        16.31
2yr            27-Apr-17         15.39
3yr            29-Jun-19        15.50
5yr            13-Feb-20        15.38

Indicative Currency Exchange Rates
                         Bid         Offer
USDNG         196.00       199.50
EURUSD       1.0972       1.1174
GBPUSD       1.5561       1.5763
USDJPY        124.48       124.51
USDCHF       0.97385    0.9840
GBPEUR       1.4042        1.4246
USDZAR      12.7797      12.9731
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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