A Review of the Nigerian Energy Industry

Financial market products & services update

*Financial markets.
*Financial markets.

03 November 2015, Sweetcrude, Lagos – Local and international financial market products and services update.
NIGERIA: Oil Price Crash Compels Nigeria, others to revise fiscal terms.
A new report by Wood Mackenzie has stated that the slump in the price of crude oil has accelerated the need for Nigeria and other sub-Saharan African countries to carry out a review of fiscal terms, as they prepare to adjust to significant reductions in tax revenue.
According to Wood Mackenzie, the percentage of government share in hydrocarbon profits across sub -Saharan African countries (onshore 66.1%; shelf 60.5%; deepwater 61.6%) is higher than the global average (onshore 57.6%; shelf 58.3%; deepwater 57.8%) despite the challenges companies face operating in the region.

FIXED INCOME: Market opened this week with a strong tone riding on the back of FAAC inflows, CRR credit and FX refund boosting System liquidity. Market sentiment is expected to remain bullish until the liquidity in the system washes away.

FX: The CBN quoted the special auction rate at 196.98 yesterday. Gross FX reserves on a 30 day moving average now at $30.192bn (30th Oct 2015) from $30.37 as at 30 Sept 2015.

MONEY MARKETS: Money market long NGN 901 bn with Overnight rates opening at 1%.

COMMODITIES: Oil traded near $46 a barrel before U.S. government data forecast to show crude stockpiles expanded in the world’s biggest consumer.
Futures were little changed in New York after falling 1% Monday. Inventories probably rose for a sixth week, a Bloomberg survey shows before an Energy Information Administration report Wednesday. Oil is near a bottom and global supplies look set to close their gap with demand amid declining output, according to Daniel Yergin, vice chairman at IHS Inc.
Oil has slumped more than 40% the past year amid speculation a global glut will be prolonged. The Organization of Petroleum Exporting Countries continues to pump above its collective quota while stockpiles in the U.S. remain more than 100 million barrels higher than the five-year seasonal average.

CHINA: China will seek to increase the Yuan’s convertibility by 2020, as the government released draft proposals of its development plan for the next five years.
The country will further open the finance industry as it promotes the Yuan’s inclusion in the International Monetary Fund’s basket of reserve currencies, the official Xinhua News Agency said, citing the Communist Party’s proposed development plan for the next five years. The plan also calls for advancing reforms of stocks and bonds issuance and speeding up the overhaul of the financial and taxation systems.
President Xi Jinping is nudging the economy toward a greater reliance on consumption and services and trying to rein in debt and investment without triggering a slump.

E.U. The specter of more stimulus from the European Central Bank risks triggering a policy reversal in Denmark, forcing it to resume currency purchases in defense of its exchange-rate regime, according to Danske Bank.
President Mario Draghi’s Oct. 22 message that the ECB is ready to ease policy further is proving a game-changer for central banks outside the euro zone.
For AAA-rated Denmark, which pegs its Krone to the Euro, that means efforts to exit a period of extreme monetary stimulus are being confounded. Arne Lohmann Rasmussen, chief analyst at Danske, says Denmark may be dumping kroner on the market as soon as next month to defend the peg. What’s more, the Danish rate increase that some economists had seen coming this year is now totally off the radar, Rasmussen said.

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     30.192

Money Market Highlights
O/N                                 01.1267
30 Days                          13.4778                                                                                                       90 Days                          15.5239
180 Days                         17.4839

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          06.32
182d         28-Apr-16         09.72
364d         20-Oct-16         10.71
2yr            31-Aug-17         12.27
3yr            30-May-18        12.35
5yr            13-Feb-20         12.70

Indicative Currency Exchange Rates
                         Bid           Offer
USDNG         197.40         199.48
EURUSD       1.0913         1.1115
GBPUSD       1.5319          1.5521
USDJPY        120.70         120.71
USDCHF       0.98235      0.9924
GBPEUR       1.3902         1.4108
USDZAR      13.6932        13.8666
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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