A Review of the Nigerian Energy Industry

Financial market products & services update

*Financial markets.
*Financial markets.

09 October 2015, Sweetcrude, Lagos – Local and international financial market products and services update.
FX: The special auction funds maintained at 196.00/197.50 yesterday. Gross FX reserves on a 30 day moving average now at $30.238bn from $30.37 as at 30 Sept 2015.

FIXED INCOME: The bullish trend continued in the fixed income market again yesterday. News of possible exclusion from the Barclays EM Bond index had no market impact since this index is not widely tracked. Bond yields came down by an average of 50bp and treasury bills yields 100bp across board. Locals are leading this rally because market liquidity is in excess of NGN1trillion with no OMO in sight. Bid/offer spreads even wider today (average N2 seen in bonds and 200bps on short dated [90days and below] benchmark bills). This trend is likely to continue unabated till if current liquidity level persists. O/N rates closed between 0.5% – 1%.

COMMODITIES: Oil rose above $50 a barrel for a second day and headed for the biggest weekly gain since August amid speculation that an increase in demand will ease a global glut. Crude traded above $50 a barrel Thursday for the first time since July on signs expanding demand will trim the surplus that drove prices to the lowest level in six years. Brent for November settlement gained as much as 95 cents, or 1.8 percent, to $54/bbl.

NIGERIA: Plans by Nigeria, to review offshore production contracts signed with international oil companies two decades ago, have added to uncertainty in an industry already lacking regulatory clarity, said analysts including Philippe de Pontet of Eurasia Group. The objective is to increase Nigeria’s earnings from the fields, according to Emmanuel Kachikwu, GMD of the Nigerian National Petroleum Corp. Yet, declining crude oil prices take away some of the incentive for investments that would’ve given the government more leverage in negotiations. “With Brent below $50 a barrel, the timing is not ripe for big contract negotiations.” de Pontet said. “If the Buhari administration is not careful its agitation for contract review could prove counterproductive at a time when the oil sector is already stagnant at best.”

U.K: Countries can’t count on other economies for growth as trade slows and emerging markets retrench, Bank of England Governor Mark Carney said. “This is a pretty unforgiving environment,” Carney said during a panel discussion Thursday in Lima, where the International Monetary Fund is holding its annual meeting. “Everybody needs to recognize there isn’t going to be a big surge of demand from abroad.” The remarks highlight the tensions facing BOE officials as they weigh domestic strength against global turmoil. Minutes of the Monetary Policy Committee’s October meeting, published Thursday, signalled that a weaker inflation outlook gives room to keep the benchmark rate at a record-low 0.5 percent.

U.S: Many economists still take Federal Reserve policy makers at their word and predict the central bank will raise interest rates this year. Yet, even their confidence was shaken a bit on Thursday after the Fed released the minutes of its most recent policy meeting. “We’re still in the camp of December,” said Thomas Costerg, a senior economist at Standard Chartered Bank in New York. Minutes of the Sept. 16-17 Federal Open Market Committee meeting showed officials were feeling pretty good about the U.S. economy. Yet the solid reading on the domestic economy was darkened by threats from abroad.

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     30.238

Money Market Highlights
O/N                                  01.2933
30 Days                           13.8232                                                                                                                            90 Days                          15.4731
180 Days                         16.9672

USD 1 Month                  0.1956
USD 2 Months               0.2484
USD 3 Months               0.3196
USD 6 Months               0.5266                                                                                                                      USD 12 Months            0.8409

Benchmark Yields
Tenor     Maturity     Yield (%)
91d           07-Jan-16          09.31
182d         07-Apr-16         11.44
364d         01-Sep-16         12.06
2yr            27-Aug-17         13.10
3yr            29-Jun-18         13.25
5yr            13-Feb-20         14.40

Indicative Currency Exchange Rates
                         Bid          Offer
USDNG         197.00        199.50
EURUSD       1.1223         1.1425
GBPUSD       1.5269         1.5471
USDJPY        120.16         120.19
USDCHF       0.95835     0.9685
GBPEUR       1.3471        1.3675
USDZAR      13.2625       13.4659
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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