A Review of the Nigerian Energy Industry

Financial market products & services update

*Financial markets.
*Financial markets.l market update.

02 October 2015, Sweetcrude, Lagos – Local and international financial market products and services update.
NIGERIA: Nigerian President Muhammadu Buhari made a national address to mark 55 years of independence and ordered auditing of the accounts of the central bank, the state oil company, the Federal Inland Revenue Service and the Nigerian Communications Commission. “Prudent housekeeping is needed now more than ever,” Buhari said in his address broadcast on national radio and television stations.
FX: Post MPC and no significant change in the market as the two way quote FX market remains shut. The special auction funds maintained at 195.95/196.95.

FIXED INCOME: The first phase of removing Nigeria from the JPM index was to happen on Wednesday. Sellers outnumbered buyers again in bonds partly on some renewed ‘optimism’ that offshore accounts could offload risk re JPM. The other part was fuelled by whispers that March 2024s would be re-tapped instead of the July 2034s in the Q4 bond auction calendar. The 2024s touched a high of 15.28% and rest of the curve was well offered before some general retracing. Whisper was later confirmed with the official release of the calendar and this caused another slight selloff. Calendar shows a slight increase of N5bn monthly (N75bn vs. N70bn last quarter) and so we expect the bearish sentiments to linger come Friday. Surprisingly, no OMO auction on Wednesday with money market liquidity still healthy. This caused bills to reverse all of yesterday’s losses and closed -48bps at 11.78% yield. O/N rates closed at 8%

COMMODITIES: Crude continues to disappoint despite making some positive ground yesterday, trading up to a high of $49.66/bbl. Macro factors are having the biggest effect and Nov ICE Brent dropped sharply after the release of the September US ISM manufacturing survey, which was weaker than expected, dropping to its lowest level since May 2013 at 50.2

CHINA: China should implement punitive measures such as a so-called Tobin tax to deter currency speculators, according to central bank Deputy Governor Yi Gang. The steps could include a punitive levy on foreign-exchange trades and the imposition of “handling” fees to counter short- term capital flows that aim for arbitrage, Yi wrote in an article in China Finance magazine, a People’s Bank of China publication. He is revisiting the Tobin tax idea after mentioning it more than a year ago. His comments suggest the PBOC take greater control at a time when China is looking to satisfy the International Monetary Fund’s condition that the yuan be more freely usable for it to be admitted into the agency’s Special Drawing Rights basket.

EUROPE: European stocks climbed as investors bet that U.S. jobs data will back up the Federal Reserve’s argument that the recovery of the world’s largest economy is intact. The Stoxx Europe 600 Index rose 1.1 percent to 350.18 at
9:23 a.m. in London. Shares fell yesterday, as an early advance was undone by a report showing U.S. manufacturing deteriorated in September. The equity gauge is heading for a 0.3 percent weekly gain. Fed officials including Chair Janet Yellen maintain the U.S. recovery is solid enough to cope with an increase in borrowing costs and investors will look to labor-market data today for evidence of this.

Macro Economic Indicators
Inflation rate (YoY) for Nov., 2014                   9.30%
Monetary Policy Rate current                          13.00%
FX Reserve (Bn $) as at January 09 2015     30.370

Money Market Highlights
O/N                                   5.8333
30 Days                           14.1909                                                                                                                            90 Days                          15.5455
180 Days                         16.6173

USD 1 Month                 0.1940
USD 2 Months               0.2594
USD 3 Months               0.3240
USD 6 Months               0.5310                                                                                                                      USD 12 Months            0.8473

Benchmark Yields
Tenor     Maturity     Yield (%)
91d           07-Jan-16          11.21
182d         07-Apr-16         13.25
364d         01-Sep-16          14.19
2yr            27-Aug-17          14.89
3yr            29-Jun-18         15.01
5yr            13-Feb-20         15.05

Indicative Currency Exchange Rates
                         Bid         Offer
USDNG         198.00       198.90
EURUSD       1.1064        1.1266
GBPUSD       1.5056        1.5258
USDJPY        120.13        120.16
USDCHF       0.97365     0.9838
GBPEUR       1.3473        1.3677
USDZAR      13.8001       14.0035
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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