A Review of the Nigerian Energy Industry

Financial market products & services update

Financial markets.
Financial markets.

31 August 2015, Sweetcrude, Houston – 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: Closing last week, improved system liquidity spurred more demand in bills as average yield declined 37bps by close. O/N rates closed at 10%. We saw some slight sell-off after the OMO auction announcement but it didn’t last long. Some of that selloff filtered into bonds as expectations of a higher stop rate at the OMO auction was being priced in. Whispers of offshore accounts selling long dated paper also filtered in and after all the selloff, bonds stayed at average 15.87% yield till end of trading. We expect to see some correction on the 20yr paper as get closer to the auction.

COMMODITIES: Oil headed for a third monthly decline as U.S. drillers showed no signs of letting up even as a supply glut persists. Oil is holding losses after a slide this month below $40 a barrel, the lowest since February 2009, on concern slowing demand in the U.S. and China will leave the global market oversupplied. Brent dropped by $1.1/bbl to $48.95

NIGERIA: In line with the federal government’s resolve to reflate economic activities in the country, the Central Bank of Nigeria (CBN) will this week continue the disbursement of its special intervention fund totalling N338 billion to 27 states in the country. Already, the funds to Kwara, Zamfara and Osun States were disbursed last week and they have commenced the payment of salary arrears to workers in their respective states.

EU: Stronger growth will pull inflation higher in the U.S. and Europe, according to three top central bankers who voiced confidence that their regions will escape from headwinds that are keeping inflation too low. Federal Reserve Vice Chairman Stanley Fischer joined European Central Bank Vice President Vitor Constancio and Bank of England Governor Mark Carney Saturday on a panel at the Kansas City Fed’s annual retreat in Jackson Hole, Wyoming, dedicated to discussing inflation dynamics. Their optimism has not been shared up until now by investors, trading in inflation- protected bonds shows. Fischer noted that given the apparent stability of inflation expectations, there is good reason to believe that inflation will move higher as the forces holding down inflation dissipate further.

CHINA: China’s banks passed on cuts in official deposit rates and even exceeded them, a sign that they lack confidence in the nation’s economic recovery. Bank of Ningbo Co. lowered its two-year deposit rate to 2.85 percent, 50 basis points more than the 2.35 percent benchmark. It paid a 65 basis point premium before the People’s Bank of China cut rates on Aug. 25. Ping An Bank Co. slashed the premium it pays on three-year time deposits to five basis points from an earlier 25 basis points. Weakness in the world’s second-largest economy and a $5 trillion stock-market slump prompted the central bank to cut loan and deposit rates last week, while giving lenders more leeway to diverge from the benchmarks.

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     31.429

Money Market Highlights
O/N                                  11.0000
30 Days                           17.2268
90 Days                           18.2936
180 Days                         19.9357

USD 1 Month                 0.1986
USD 2 Months               0.2663
USD 3 Months               0.3290
USD 6 Months               0.5228
USD 12 Months             0.8433

Benchmark Yields
Tenor     Maturity     Yield (%)
91d           26-Nov-15        15.95
182d         25-Feb-16        16.40
364d        04-Aug-16        15.93
2yr            27-Apr-17         15.83
3yr            29-Jun-19        15.86
5yr            13-Feb-20        15.90

Indicative Currency Exchange Rates
                         Bid         Offer
USDNG         197.00       199.50
EURUSD       1.1118        1.1320
GBPUSD       1.5307       1.5509
USDJPY        121.16        121.19
USDCHF       0.95625    0.9664
GBPEUR       1.3631        1.3835
USDZAR      13.2351      13.4385
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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