A Review of the Nigerian Energy Industry

Financial market products & services update

Financial markets.
Financial markets.

10 September 2015, Sweetcrude, Houston – Local and international financial market products and services update.

NIGERIA: Manufacturers of Cement in Nigeria may be on the brink of a fresh competition tussle, following the reported cut in the price of the essential commodity implemented by the nation’s largest producer, Dangote Group.
Dangote Cement, also Africa’s largest producer of the product, recently cut prices in the local market in a move to further boost cement consumption.
The price cuts to its 3X cement brand by N6,000 ($30.23) per metric tonne, translating to N300 reduction per 50kg bag, allows Dangote to still achieve strong returns, CEO Dangote Cement, Onne van der Weijde, said in Lagos yesterday.
Meanwhile, a survey across the country revealed that distributors and retailers are beginning to implement the new price regime, resulting in gradual decline in the price of cement across the country.

The Federal Government’s daily spending on petrol subsidy may dropped from the N2.4 billion it recorded in June to N1.07 billion as at Monday this week. Specifically, the country’s daily subsidy per litre of fuel has decreased from the N51.61per litre it recorded on June 11 to N22.42 per litre. The Petroleum Products Pricing Regulatory Agency (PPPRA), which made this disclosure on Monday in its pricing template , put the expected open market price of the product at N109.42. Based on daily petrol consumption of 48 million litres, the total subsidy cost on the product as of September 7, would amount to N1.07 billion at N22.42 per litre. The landing cost of Premium Motor Spirit (PMS), otherwise known as petrol, has also dropped from N123.12 per litre to N93.93, while the Expected Open Market Price declined fromN138.61 per litre N109.42. Subsidy refers to the money paid by the government, to keep prices below what they will otherwise be in a free market system. Nigeria, which relies on importation for most of its fuel needs as the country’s refineries are in a poor state, has seen a drop in importation of refined petroleum products in recent months, leading to acute scarcity of the products across the country.

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. The downward trend in gross FX reserves continued with the latest updated figure as at 07.09.2015 reported at $31.013 bn, the lowest level since 24.07.2015.

FIXED INCOME: OMO auction announced yesterday caused O/N rate to inch up to 13% and then retraced to closed lower after nothing was sold at the auction. The T-bill market was bearish yesterday. Expectations were for a successful OMO auction so some players took profit to reinvest cash at higher yield at the OMO. Bond market extended more losses yesterday driven by locals cutting positions. Market expects PFAs to show interest in the Bond market today.

UK: The pound weakened for a second day against the euro as investors awaited the result of the Bank of England’s policy meeting for clues about when officials will start raising interest rates from a record low.
Sterling retreated from near its strongest level in almost three weeks against Europe’s shared currency. Speculation that the turmoil unleashed by China on global financial markets, combined with signs this week of a loss of momentum in the U.K. economy, may prompt the central bank to adopt a cautious approach to tightening policy. The BOE’s nine-member Monetary Policy Committee, led by Governor Mark Carney, is scheduled to release its rate decision and minutes of the deliberations at noon in London on Thursday.
The pound weakened 0.1 percent to 73.02 pence per euro as of 7:12 a.m. London time, having touched 72.40 pence on Wednesday, the strongest level since Aug. 21. Sterling was little changed at $1.5374.

CHINA: China will open its domestic foreign-exchange market to overseas central banks, making it easier for other nations to hold yuan assets as Asia’s biggest economy pushes for the currency to win reserve status at the International Monetary Fund.
The country will keep the yuan stable at a reasonable, equilibrium level, Premier Li Keqiang said while announcing the easing of controls during a speech at a World Economic Forum meeting Thursday. The nation doesn’t want a currency war, he said, after the People’s Bank of China shook up global markets with a devaluation on Aug. 11. Overseas monetary authorities have already been granted access to China’s interbank bond market.

COMMODITIES: Oil held below $45 a barrel before U.S. government data forecast to show crude stockpiles expanded for a second week in the world’s biggest oil consumer. Futures were little changed in New York after declining 3.9% Wednesday. Inventories probably rose by 900,000 barrels last week, according to a Bloomberg survey before data from the Energy Information Administration.

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     31.013

Money Market Highlights
O/N                                   8.2917
30 Days                           15.1876
90 Days                           16.2000
180 Days                         17.7743

USD 1 Month                 0.2030
USD 2 Months               0.2685
USD 3 Months               0.3320
USD 6 Months               0.5380
USD 12 Months             0.8568

Benchmark Yields
Tenor     Maturity     Yield (%)
91d           10-Dec-15          13.40
182d         17-Mar-16         15.01
364d         01-Sep-16         16.47
2yr            31-Apr-17         16.61
3yr            30-May-18       16.66
5yr            13-Feb-20        16.41

Indicative Currency Exchange Rates
                         Bid         Offer
USDNG         196.00        199.50
EURUSD       1.1093        1.1294
GBPUSD       1.5258        1.5460
USDJPY        120.92        120.95
USDCHF       0.97265     0.9828
GBPEUR       1.3620        1.3824
USDZAR      13.7335      13.9369
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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