10 November 2015, Sweetcrude, Lagos – Local and international financial market products and services update.
NIGERIA: A minister-designate and Group Managing Director of Nigerian National Petroleum Corporation (NNPC), Dr. Ibe Kachikwu has said the $30 currently spent by oil companies to produce one barrel of crude oil in Nigeria is too high and should be reduced in view of the current low price regime.
Speaking at a Luncheon organized in his honour by the Petroleum Club in Lagos at the weekend, Kachikwu stated that asset management by the NNPC was so poor that the state-run oil company had relied only on information provided by (IOCs).
According to him, the high cost of producing oil and gas in the country was caused by NNPC’s poor asset management, adding that one of the legacy issues that faced the current administration was excessive corruption at the NNPC, and the Ministries of Petroleum and Defence.
FIXED INCOME: Yields continue to compress in the secondary market trading as the rally continues. Buy side client making room for the auction and offloading risk on the long end but this was met with healthy demand. Overall, bond yields are down 75bps average and T-bills 52bps. Right now, street positioning remains in one direction (buyers) and will likely continue to be that way today. The rally is expected to continue given the system remains pretty liquid and traders taking profit ahead of the bond auction.
FX: Naira appreciated by 2 kobo yesterday as the CBN quoted the special auction rate at 196.98 yesterday. Gross FX reserves on a 30 day moving average now at $30.308bn (5th Nov 2015) from $30.192 as at 30 Oct 2015.
COMMODITIES: Gold assets held in the world’s biggest exchange-traded product backed by the metal fell to the lowest since the financial crisis.
Holdings in SPDR Gold Shares slid 0.4% on Monday to 666.11 metric tons, the lowest since September 2008. That’s the month that Lehman Brothers Holdings Inc. collapsed, spurring a rout across global markets. Assets fell for a sevenths straight session, the longest streak since July.
Gold prices have been trapped in a bear market as the economy’s recovery from the crisis sent equity markets rallying and cut demand for haven assets.
CHINA: China’s consumer inflation waned in October while factory-gate deflation extended a record streak of negative readings, signaling policy makers may need to hit the gas again to ease deflationary pressures.
The consumer-price index rose 1.3% in October from a year earlier, according to the National Bureau of Statistics, missing the 1.5% median estimate in a Bloomberg survey and down from 1.6% in September. The producer-price index fell 5.9%, its 44th straight monthly decline.
The lingering deflation risks, along with weakening trade, open the door for additional stimulus as inflation remains about half the government’s target pace. The People’s Bank of China — which has cut interest rates six times in the past year — is seeking to stabilize the economy without fueling a renewed surge in debt.
SOUTH AFRICA: The rand’s plunge to a record against the dollar has shaken any complacency investors may have had about prospects for a South African rate increase this year.
As recently as last week, forward-rate agreements predicted only a 30% change of an increase in borrowing costs at the Monetary Policy Committee’s final meeting of the year on Nov. 19. That probability jumped to more than 60 percent after U.S. jobs data on Friday bolstered the case for tightening by the Federal Reserve in December. The question now facing investors is no longer if the South African Reserve Bank will tighten policy, but whether it will do so before the Fed, according to Rand Merchant Bank.
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 30.308
Money Market Highlights
30 Days 13.3283 90 Days 14.8740
180 Days 16.6549
USD 1 Month 0.1945
USD 2 Months 0.2600
USD 3 Months 0.3414
USD 6 Months 0.5708 USD 12 Months 0.9012
Tenor Maturity Yield (%)
91d 11-Feb-16 02.62
182d 05-May-16 04.42
364d 20-Oct-16 05.52
2yr 31-Aug-17 08.67
3yr 30-May-18 09.28
5yr 13-Feb-20 10.02
Indicative Currency Exchange Rates
USDNG 197.50 199.50
EURUSD 1.0654 1.0856
GBPUSD 1.5009 1.5211
USDJPY 123.38 123.41
USDCHF 0.99835 1.0086
GBPEUR 1.3947 1.4150
USDZAR 14.1427 14.3469
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