A Review of the Nigerian Energy Industry

Financial market products & services update

Financial markets
Financial markets

25 august 2015, Sweetcrude, Houston – Local and international financial market products and services update.
NIGERIA: Nigeria plans to boost its wheat output and cut imports by half by 2017 as farmers ramp up production of two new strains that thrive well in warmer climates, according to the country’s Lake Chad Research Institute. Two wheat varieties released to farmers since 2014 can produce from 3.5 metric tons to 6.5 tons per hectare (2.471- acres) and could grow with rain water or irrigation, Oluwasina Olabanji, executive director of the institute based in the northeastern city of Maiduguri, said in an e-mailed response to questions on Monday. Previous strains had maximum output per hectare of 4 tons for irrigated farms and 2.5 tons per hectare for those using rain water. “I hope that by 2017, our production will hit 1.5 million metric tonnes and reduce importation by 50 percent,” said Olabanji. “This is our target and is achievable. Annual wheat production should grow at 20 percent from 2017.” Africa’s biggest economy and most populous country of about 180 million people imported 3.8 million tons of wheat in the 2013-2014, most of it from the U.S., with demand projected to increase in 2014-2015, according to the U.S. Department of Agriculture.

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: July 2034s held up pretty well yesterday amidst a selloff. Whisper is that there was very healthy local demand for this paper. This kept the 34s range bound for most of the day while the rest of the curve got hammered. Macro picture worsened yesterday as Brent fell below $45/bbl for the first time since March 2009 so we continued the selloff seen last week. March 2024s hit the hardest as offshore accounts offloaded more risk. Locals also seen reducing risk but PFAs interested in papers at 15.70-15.80% levels but in small sizes. Bill market equally sold off with no respite yet in the money market. OMO maturity (NGN 102bn) and FAAC inflows expected later this week and this should give decent support. O/N rates closed between 35-40%.

COMMODITIES: Oil rose, stemming its decline to a six-year low, while swelling U.S. crude stockpiles kept the market under pressure amid a global selloff. Brent for October settlement gained as much as 72 cents, or 1.7 percent, to $43.41 a barrel on the London-based ICE Futures Europe exchange.

INDIA: Indian money managers are starting to see the glass as half full in their company earnings outlook. Falling oil prices are underpinning expectations that the worst is over for corporate profits as savings translate into higher investment and consumer spending, despite the worst equity losses in six years on Monday amid a global rout. The S&P BSE Sensex earnings climbed 1 percent in the quarter to June, following a 45 percent drop in the prior three months, data compiled by Bloomberg show. The 57 percent drop in Brent crude in the past 12 months will save the government about $50 billion a year, estimates Ramesh Damani, an investor and a member of BSE Ltd., Asia’s oldest bourse. Sensex earnings will jump more than 40 percent in the coming year, forecasts compiled by Bloomberg show.

CHINA: Chinese shares plummeted to extend the steepest four-day rout since 1996 on concern the government is abandoning market support measures. The Shanghai Composite Index tumbled 7.6 percent to 2,964.97 at the close, sinking below the 3,000 level for the first time in eight months. Speculation around the government’s intentions has escalated since Aug. 14, after China’s securities regulator signaled authorities will pare back the campaign to prop up share prices as volatility falls.

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     31.527

Money Market Highlights
O/N                                 45.9167
30 Days                           17.5488
90 Days                           18.8699
180 Days                         19.6681

USD 1 Month                 0.1994
USD 2 Months               0.2664
USD 3 Months               0.3316
USD 6 Months               0.5245
USD 12 Months             0.8333

Benchmark Yields
Tenor     Maturity     Yield (%)
91d           26-Nov-15        15.35
182d         25-Feb-16        15.99
364d        04-Aug-16        15.94
2yr            27-Apr-17         15.76
3yr            29-Jun-19        15.71
5yr            13-Feb-20        15.59

Indicative Currency Exchange Rates
                         Bid         Offer
USDNG         197.00      199.50
EURUSD       1.1428       1.1630
GBPUSD       1.5678       1.5880
USDJPY        119.74       119.77
USDCHF       0.93475    0.9449
GBPEUR       1.3584        1.3788
USDZAR      13.0188      13.2222
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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