A Review of the Nigerian Energy Industry

Financial market products & services update

Financial markets.
Financial markets.

21 August 2015, Sweetcrude, Lagos – Local and international financial market products and services update.
NIGERIA: To ensure efficiency, transparency and free enterprise in the country’s oil sector, the Nigerian National Petroleum Corporation (NNPC) has reiterated the need for deregulation of the industry. The NNPC also disclosed that it was putting in place a fresh strategy aimed at rehabilitating brownfield refineries using a new business model. Meanwhile, the United States (U.S.) and the Independent Petroleum Marketers Association of Nigeria (IPMAN) have pledged their readiness to work with the new management of the NNPC to achieve the Federal Government’s reform agenda in the oil and gas industry. Speaking at a yearly energy conference in Lagos yesterday, Group Managing Director of the NNPC, Dr. Emmanuel Kachikwu, said a speedy implementation of deregulation would encourage private sector and international investment into the country. Speaking on the theme, “Energy Crisis and Sustainable Development in Nigeria: The Way Forward,” Kachikwu noted that subsidy creates distortions in government revenue distribution as a result of round tripping and unnecessary carry-over of expenditures yearly in a way that is difficult for government to control or sustain.

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: NGN reimbursements for unsuccessful FX bids at the daily auction is giving support to money market and bill market. Bill market seeing some of this cash from reimbursement being put to work and yields went lower by another 15bps. O/N rates still stable in the 25-30% range – no spikes even though money market is long only N73.11bn. Bond market was quiet, trades were in small clips as street went back into their shells. Yields a touch wider except Apr 2017s which saw some decent selling but no word yet on who/what was behind it. Expect more of the same tomorrow in both bonds and bills.

EUROPE: Greece’s Prime Minister Alexis Tsipras has announced that he is resigning and has called an early election. Mr Tsipras, who was only elected in January, said he had a moral duty to go to the polls now a third bailout had been secured with European creditors. The election date is yet to be set but earlier reports suggested 20 September. Mr Tsipras will lead his leftist Syriza party into the polls, but he has faced a rebellion by some members angry at the bailout’s austerity measures. He had to agree to painful state sector cuts, including far-reaching pension reforms, in exchange for the bailout – and keeping Greece in the eurozone. Greece received the first €13bn ($14.5bn) tranche of the bailout on Thursday after it was approved by relevant European parliaments.

CHINA: Factory activity in the world’s second largest economy, China, shrank at its fastest pace in more than six years in August. The manufacturing purchasing managers’ index (PMI) dropped to 47.1 from 47.8 in July. A figure below 50 shows contraction in the sector and one above means growth. As domestic and export demand dwindle, Friday’s data is likely to compound global worries that the Chinese economy is set for a continued slowdown. Friday’s reading was the lowest since March 2009, during the depths of the global financial crisis, and the sixth consecutive below the 50-point level.

COMMODITIES: U. S. oil prices rose from six-year lows Thursday, but analysts say they expect prices to continue falling on worries that the global glut of crude is growing. Light, sweet crude for September delivery settled up 34 cents, or 0.8%, at $41.14 a barrel on the New York Mercantile Exchange. The September contract expired at settlement Thursday. The more actively traded October contract settled up 5 cents, or 0.1%, at $41.32 a barrel. Brent, the global benchmark, fell 54 cents, or 1.1%, to $46.62 a barrel on ICE Futures Europe, the lowest settlement since January.

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     31.558

Money Market Highlights
O/N                                 30.8750
30 Days                           18.3158
90 Days                           20.4606
180 Days                         21.2936

USD 1 Month                 0.2004
USD 2 Months               0.2684
USD 3 Months               0.3291
USD 6 Months               0.5328
USD 12 Months             0.8576

Benchmark Yields
Tenor     Maturity     Yield (%)
91d           12-Nov-15         14.91
182d         04-Feb-16        15.47
364d        04-Aug-16        16.27
2yr            27-Apr-17         15.61
3yr            29-Jun-19        15.50
5yr            13-Feb-20        15.45

Indicative Currency Exchange Rates
                         Bid         Offer
USDNG         196.00      199.50
EURUSD       1.1150       1.1352
GBPUSD       1.5616       1.5818
USDJPY        122.93       122.96
USDCHF       0.95265    0.9628
GBPEUR       1.3867        1.4071
USDZAR      12.7966      13.0000
JPYNGN      161.8497    161.9503
CHFNGN       204.99      206.68
EURNGN       217.24       219.60
GBPNGN        309.40     310.79
ZARNGN          14.69      16.61

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