A Review of the Nigerian Energy Industry

Financial market products & services update

Financial markets.
Financial markets.

18 September 2015, Sweetcrude, Lagos – Local and international financial market products and services update.
NIGERIA: Close to 70 percent of Nigeria’s industry-wide N5 trillion contributory pension assets (about N3.5 trillion) is held in the Federal Government bonds and Treasury Bills, as authorities remain optimistic that the recent delisting from the JP Morgan Index will not affect yields significantly. A bulk of it is in government securities because of its safety 12 percent (about N600 billion) of the N5 trillion assets is invested in equities, and another 15 percent (about N750 billion) in money market, Misbahu Yola, Managing Director, Legacy Pensions and Chairman, Pension Fund Operators Association of Nigeria (PENOP) said on Thursday. Contributory Pension Coverage, in Nigeria totals about 6.7 million as at June 2015, but operators believe that they could have done more if not for obvious challenges of getting more contributors into the scheme. PENCOM and industry operators had agreed to grow participation up to 20 million by 2024 and that is where the informal sector guideline becomes very critical. Speaking at the end of PENOP consultative forum, held every two months for operators in the pension industry and the regulator (Pension Commission) to discuss policy issues and any other that affect the industry, Yola said that JP Morgan’s delisting of Nigerian bonds ought not to be of serious concern since foreign participation on FG bonds had significantly dwindled even before the recent exit from index. Yola noted that the main discussions at the forum centered around a number of guidelines that would help boost the industry which were still awaited from the regulator. Those include informal sector multi guidelines, voluntary contributions, minimum pension guarantee, access to mortgage and some few others.
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.Respite for market liquidity today as the state owned Oil Company offered over $300m in the interbank market. This is the largest volume sold by the national oil company since the announced change in leadership by the Buhari administration.

FIXED INCOME: Short covering was the order of the day in bonds. With supply from offshore not coming in, supply from DMO was the only option left but the auction was ‘managed’ (less was sold). We saw some decent moves and expect this rally to continue tomorrow. System liquidity down to N210bn approx with whispers that remaining debits to TSA were done yesterday. Liquidity still enough to support demand for bills and yields came down by 49bps. O/N rates closed at 15%. Average yield on bonds now 15.50% and bills 13.82%. Second tranche of the switch – government bonds (July 34s) for state loans came in yesterday but yield unconfirmed.

COMMODITIES: Industrial metals declined after the Fed decision renewed concerns about the strength of the global economy. Copper dropped 0.5 percent to $5,361.50 a metric ton, while nickel fell 0.9 percent. Oil headed for a weekly increase after data showed an unexpected decline in U.S. crude stockpiles. WTI crude was 25 cents lower at $46.64 a barrel, paring a weekly gain of 4.5 percent. Brent crude advanced 18 cents to $49.26.

U.S: Federal Reserve Chair Janet Yellen shows signs of taking a page out of her predecessor’s policy playbook as she inches toward the central bank’s first interest rate increase in nine years: Delay action in September only to move in December. While the Fed on Thursday opted to keep rates pinned near zero for now, Yellen told a press conference that most policy makers still expect to raise rates this year. She highlighted the strength of the U.S. economy, tying the decision to delay liftoff to fresh uncertainty about the outlook abroad and to financial market turbulence over the past month.

CHINA: There is not and will not be a massive foreign capital outflow from China, the foreign exchange regulator said Thursday to reassure a panicked market before the Federal Reserve decides whether to hike US interest rates. “Depreciation pressure on the Chinese yuan has largely been removed and its value has almost stabilized,” said Wang Yungui, a department director with the State Administration of Foreign Exchange (SAFE).The Fed will hold a monetary policy meeting on Friday morning to decide whether to raise the interest rate. The hike, the US central bank has hinted for months, could help repatriate capital from emerging markets to the United States for higher returns. The yuan has substantially depreciated against the US dollar since August, while China still maintains a large trade surplus and its economic fundamentals are still sound, he said.

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     30.693

Money Market Highlights
O/N                                 23.1250
30 Days                           16.2795                                                                                                                            90 Days                          16.9368
180 Days                         17.7104

USD 1 Month                 0.2128
USD 2 Months               0.2765
USD 3 Months               0.3396
USD 6 Months               0.5495
USD 12 Months             0.8665

Benchmark Yields
Tenor     Maturity     Yield (%)
91d           17-Dec-15          11.58
182d         17-Mar-16         13.83
364d         01-Sep-16         15.29
2yr            31-Apr-17         15.99
3yr            30-May-18       15.18
5yr            13-Feb-20        15.16

Indicative Currency Exchange Rates
                         Bid         Offer
USDNG         196.00        199.50
EURUSD       1.1347        1.1549
GBPUSD       1.5584         1.5786
USDJPY        119.33         119.36
USDCHF       0.95195     0.9611
GBPEUR       1.3576        1.3780
USDZAR      13.0855       13.2889
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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