A Review of the Nigerian Energy Industry

Financial market products & services update

*Financial markets.
*Financial markets.

02 November 2015, Sweetcrude, Lagos – Local and international financial market products and services update.
NIGERIA: September report by the NNPC has shown that the corporation lost N5.53bn from its income in August after declaring N38.67bn from sale of downstream petroleum products in September.
The information is contained in the corporation’s report for September made available to newsmen in Abuja on Sunday. It stated that the amount was in respect of revenue from “white products” sold by the Pipelines and Product Marketing Company (PPMC).
The report stated that the total crude processed by the three refineries in September was 261,371.14 bbls (35,648 MT) translating to a combined capacity utilization of 1.96%. The Port Harcourt refinery alone produced 31,008 million MT of petroleum products, out of 35,648 million MT of crude processed at an average capacity utilization of 5.7%.

FIXED INCOME: Market sentiment on Friday was bullish both in T-bills and Bonds driven by sufficient liquidity in the system. Big movers were the short dated T-bills (<40days) with 1week paper (12 Nov 15) traded at a low of 1.4% yield. Equally strong tone in bonds. Week on week the yield in T-bills dropped about 57bps, and by 25bps in bonds to close at 7.98% and 13.16% respectively. CBN will be offering N45.2bn -91day, N23.4bn -182day and N54.4bn -364day at the T-bill auction this Wednesday.

FX: The CBN quoted the special auction rate at 197.00 on Friday. Gross FX reserves on a 30 day moving average now at $30.176bn from $30.37 as at 30 Sept 2015.

MONEY MARKETS: Overnight rates declined over 300bp by close of business on Friday from 5% opening levels at the start of the week. The central bank announced a special auction during the week which sterilized a chunk of liquidity from the system and caused a slight uptick in rates to 6%. By Thursday last week, on the back of OMO maturities we saw rates drop sharply to 2% where it closed the week.
Meanwhile, The Federal Accounts Allocation committee has approved N390bn as revenue for September and we should see payments (c. N182bn)to the state and local levels of Government from early this week. This is the lowest we have seen in the monthly statutory allocations this year and we probably could see much lower levels if Oil prices do not recover soon.

COMMODITIES: OPEC will probably hold production steady at its meeting next month as the gap between supply and demand for oil closes, according to the analyst who correctly predicted last year’s rout in prices. Oil tumbled more than 48% last year as U.S. stockpiles and production expanded, creating a global oversupply that the International Energy Agency estimates will persist until at least the middle of 2016. OPEC’s strategy to defend market share has exacerbated the glut as the group, which kept its production target unchanged at 30 million barrels a day at the last meeting in June, exceeded the quota for the past 17 months.

CHINA: As China’s Communist Party leaders began rolling out a blueprint last week to manage a transition to more balanced growth over the next five years, they confront the immediate task of halting the economy’s slide toward a debt-deflation trap.
The central bank stepped up efforts last month to avert that risk with a sixth interest-rate cut in a year. While easier policy helps tide over the short term, a long-term fix needs leaders to back reforms in the 13th five-year plan that slash excess industrial capacity, rev up new growth drivers and shift funding away from deadbeat state companies to vibrant private ones.

U.S: The odds that the Federal Reserve will increase interest rates before year-end climbed to 50%, suggesting Treasuries are poised to extend October’s biggest monthly loss since June.
The probability the Fed will act at its next meeting Dec. 15-16 rose from a 33% chance in early October, futures contracts show. Ten-year U.S. yields will advance about 16 basis points by Dec. 31, based on Bloomberg surveys of economists. An investor who bought Monday would lose 1 percent after interest payments, according to data compiled by Bloomberg. Treasuries fell 0.4% in October, Bloomberg bond indexes show. Treasury 10-year note yields were little changed at 2.13% as of 6:42 a.m. in London, according to Bloomberg Bond Trader data. The price of the 2% security due in August 2025 was 98 27/32.

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     30.176

Money Market Highlights
O/N                                 01.2917
30 Days                          13.6050                                                                                                       90 Days                          15.3583
180 Days                         17.4242

USD 1 Month                  0.1920
USD 2 Months                0.2530
USD 3 Months                0.3341
USD 6 Months                0.5516                                                                                                       USD 12 Months              0.8684

Benchmark Yields
Tenor     Maturity     Yield (%)
91d           28-Jan-16          06.95
182d         28-Apr-16         09.77
364d         20-Oct-16         11.20
2yr            31-Aug-17         12.63
3yr            30-May-18        12.78
5yr            13-Feb-20         13.01

Indicative Currency Exchange Rates
                         Bid           Offer
USDNG         197.40         199.48
EURUSD       1.0920        1.1122
GBPUSD       1.5329         1.5532
USDJPY        120.52         120.55
USDCHF       0.98205      0.9923
GBPEUR       1.3896         1.4099
USDZAR      13.6932        13.8972
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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