A Review of the Nigerian Energy Industry

Financial market products & services update

*Financial markets.
*Financial markets.

30 October 2015, Sweetcrude, Lagos – Local and international financial market products and services update.
NIGERIA: The Central Bank of Nigeria, CBN, recent decision to cease its regular mop-up of liquidity from the system, mostly through its open market operations (OMO) instrument, has released a lot of liquidity into the financial system. This is evident in the Nigerian Interbank Offered Rates, NIBOR, especially the overnight tenor, which has fallen significantly. The overnight tenor closed at 6.175% on Thursday. The yield on a 90-day naira-denominated treasury bill has fallen from 14.9% in August to 9.3% recently. Having been essentially flat for at least five years, the naira yield curve now has a positive slope. These, together with the a six per cent reduction in commercial banks’ cash reserve requirement from 31% to 25% by CBN last month, according to analysts, have more than offset the reduction in liquidity resulting from the implementation of the Treasury Single Account, TSA, initiative.

FIXED INCOME: Yesterday had a firm trading session with spreads inching tighter. Liquidity remains supportive of demand both in T-bills and Bonds. OMO maturities caused another decline in overnight rates and overnight rates eased to 2% range from 6.17%. FAAC allocation has dipped further, down 12% from last month. But this could spur some more demand today albeit small.

FX: The CBN quoted the special auction rate at 197.00 yesterday and we still observed that the demand still outweighs current supply. Gross FX reserves on a 30 day moving average now at $30.130bn from $30.37 as at 30 Sept 2015.

COMMODITIES: Crude was poised to end its fourth month below $50 a barrel amid a global glut that’s showing no signs of relief for oil and gas companies that posted more than $19 billion in write downs in a single week.
Futures slid as much as 1% in New York. U.S. crude stockpiles rose for a fifth week through Oct. 23, keeping supplies more than 100 million barrels above the five-year seasonal average, government data showed Wednesday.
Oil failed to sustain a gain above $50 a barrel earlier this month as the Organization of Petroleum Exporting Countries pumps above its quota and the International Energy Agency estimates the surplus will remain until at least the middle of 2016.

CHINA: The Yuan surged the most since March as China’s central bank said it will test Yuan capital account convertibility in a free trade zone in Shanghai.
The Yuan rose 0.48%, the most since March 19, to 6.3264 a dollar as of 3:05 p.m., in Shanghai, according to China Foreign Exchange Trade System prices. The currency in Hong Kong climbed 0.48% to 6.3279, data compiled by Bloomberg show. The People’s Bank of China earlier strengthened its daily onshore reference rate by 0.16% to 6.3495.
The Shanghai FTZ will also expand Yuan cross-border use, according to a plan posted on the website. Large Chinese banks sold $15 billion in the offshore market, according to a foreign-exchange trader.

U.S: Congress passed a two-year bipartisan budget plan that avoids a catastrophic default on U.S. debt, increases spending on domestic and defense programs and ends months of turmoil among House Republicans.
The 64-35 Senate vote early Friday, following House passage two days earlier, sends President Barack Obama a bill that will extend U.S. borrowing authority until March 2017, after he leaves office. The agreement likely frees Obama of protracted fiscal battles with congressional Republicans for the rest of his term. It also means House Speaker Paul Ryan, a Wisconsin Republican, won’t have to deal with a fight that helped drive his predecessor from office.
Lawmakers were racing against a Nov. 3 deadline to avoid a debt default.

Macro Economic Indicators
Inflation rate (YoY) for Nov., 2014                   9.40%
Monetary Policy Rate current                          13.00%
FX Reserve (Bn $) as at January 09 2015     30.130

Money Market Highlights
O/N                                 03.2500
30 Days                          13.6421                                                                                                       90 Days                          15.3032
180 Days                         17.2441

USD 1 Month                  0.1883
USD 2 Months                0.2463
USD 3 Months                0.3219
USD 6 Months                0.5337                                                                                                       USD 12 Months              0.8362

Benchmark Yields
Tenor     Maturity     Yield (%)
91d           28-Jan-16          07.35
182d         28-Apr-16         10.31
364d         20-Oct-16         11.21
2yr            31-Aug-17         12.82
3yr            30-May-18        12.94
5yr            13-Feb-20         13.16

Indicative Currency Exchange Rates
                         Bid           Offer
USDNG         197.50         199.50
EURUSD       1.0890        1.1092
GBPUSD       1.5240         1.5442
USDJPY        120.76         120.78
USDCHF       0.98405      0.9942
GBPEUR       1.3852         1.4055
USDZAR      13.7073        13.9104
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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