A Review of the Nigerian Energy Industry

Financial market products & services update

Financial markets.
*Financial markets.

15 September 2015, Sweetcrude, Houston – Local and international financial market products and services update.
NIGERIA: In its renewed bid to ensure transparency in all commercial activities relating to petroleum operations in Nigeria, the Nigerian National Petroleum Corporation (NNPC) has released the guidelines for the participation of local and foreign companies in the sale and purchase of the various grades of Nigerian crude oil.
The release of the guidelines is coming a few weeks after the corporation initiated measures to make the yearly Offshore Processing Agreements (OPAs) between it and oil traders more transparent.
But while the latest guidelines are in relation to the sale and purchase of Nigeria’s crude oil, OPAs and oil swap agreements are only in respect of the 445,000 barrels of crude oil per day allocated to the NNPC for the country’s refineries.

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. Gross external reserves fell to $30.794 bn

FIXED INCOME: The market liquidity is likely to be under pressure as the TSA (Treasury Single Account) policy takes effect from today. The driver of the market today will be the TSA and we expect this to drive a hike in yields. Demands were seen in the bond market yesterday but not as that of last week.

U.K: Traders of U.K. government bonds counting on Britain’s record-low interest rates continuing deep into 2016 risk missing the train, should the Federal Reserve raise its benchmark this week. “There’s a popular belief that the sooner the Fed goes, the sooner the BOE will follow,” said Kit Juckes, a London-based global strategist at Societe Generale SA, referring to the Bank of England.
Even with about one-half of economists predicting the Fed will move as soon as its Sept. 16-17 meeting, forward contracts reflecting investor perceptions signal the BOE Monetary Policy Committee won’t follow with a full 25 basis-point increase in its own key rate until late 2016. That means if Fed officials raise for the first time since 2006 this week, short-dated U.K. government-bond yields may jump as investors assess the pull on Britain.

CHINA: Stimulus unleashed by China’s central bank will cushion Chinese companies –the region’s biggest dollar debt issuers — from a potential Federal Reserve interest rate increase, making cheaper Yuan funds available.
Five interest rate cuts by the People’s Bank of China since November and rules to relax Yuan bond issuance onshore mean Chinese companies are becoming less reliant on dollar funding. Corporates from the world’s second-biggest economy have some $302.9 billion in dollar-denominated bonds outstanding, and will face higher costs to issue more such notes, or repay them in Yuan, if the U.S. central bank tightens monetary policy.

COMMODITIES: Oil held below $45 a barrel before U.S. government data forecast to show crude stockpiles expanded for a third week in the world’s biggest oil consumer. Futures rose as much as 1.1% in New York, paring the 4.2% drop over the previous two days. Inventories probably increased by 1.75 million barrels last week, according to a Bloomberg survey before an Energy Information Administration report Wednesday. The Organization of Petroleum Exporting Countries predicts output from outside the group will climb slightly next year, even after trimming estimates for non- OPEC supply, , according to its monthly market report.

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     30.794

Money Market Highlights
O/N                                   8.2917
30 Days                           15.2144
90 Days                           16.1734
180 Days                         17.5308

USD 1 Month                 0.2065
USD 2 Months               0.2713
USD 3 Months               0.3372
USD 6 Months               0.5407
USD 12 Months             0.8556

Benchmark Yields
Tenor     Maturity     Yield (%)
91d           17-Dec-15          12.26
182d         17-Mar-16         15.21
364d         01-Sep-16         15.93
2yr            31-Apr-17         16.01
3yr            30-May-18       15.96
5yr            13-Feb-20        15.99

Indicative Currency Exchange Rates
                         Bid         Offer
USDNG         196.00        199.50
EURUSD       1.1207        1.1409
GBPUSD       1.5345        1.5547
USDJPY        119.63        119.66
USDCHF       0.96455     0.9747
GBPEUR       1.3558        1.3762
USDZAR      13.3661       13.7185
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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