18 December 2015, Sweetcrude, Houston – Local and international financial market products and services update.
NIGERIA: Minister of Finance, Mrs. Kemi Adeosun, has said the Federal Government will borrow internationally and locally to finance the deficit in the 2016 budget. The minister told an online publication that the development was as a result of dwindling oil prices which are putting pressure on the economy.
According to Mrs Adeosun, “the deficits in the 2016 budget – which I based on an oil price of $38 per barrel – will more than double to N2.2 trillion.
Nigeria has a debt-to-GDP ratio of 12%, compared with 57% for Angola and 48% for South Africa, according to the International Monetary Fund (IMF). This feat is expected to assist the country in borrowing internationally.
FIXED INCOME: OMO auction announcement weighed in more than news of the Fed raising rates. The fixed income market became weaker on the back of this mop up exercise (money liquidity opened in excess of N1trillion). Bonds (+12bps) and bills (+39bps) widened some more yesterday while O/N rates moved up from 0.5% to 1% on the back of the OMO. We expect bearish sentiments to close the week.
FX: The CBN intervention rate remained at $/NGN 196.97 Yesterday.
COMMODITIES: Oil traded below $35 a barrel and headed for a third weekly decline amid a worsening U.S. supply glut and the first interest rate increase by the Federal Reserve in almost a decade.
Futures held losses in New York after closing Thursday at the lowest in almost seven years, and were down 2.3% this week. Crude stockpiles surged to 490.7 million barrels, the highest for this time of year since 1930, according to the Energy Information Administration. Goldman Sachs Group Inc. warned of “high risks” that prices may sink further as supplies swell. The Fed decision bolstered the dollar, diminishing the investment appeal of commodities.
JAPAN: Japanese shares fell as tweaks to the Bank of Japan’s monetary stimulus boosted the yen and spurred gains in the nation’s bonds. Emerging-market stocks resumed losses, having slipped to a six-year low earlier in the week, and oil fell.
The Topix and the Yen were whipsawed while Japan’s 10-year bond yield dropped to the lowest since January as the BOJ announced a new program of exchange-traded fund purchases and plans to extend the maturities of its government bond holdings. The MSCI Emerging Markets Index fell for the first time in four days, led by losses in raw-materials producers and technology companies.
U.K: Prime Minister David Cameron said his bid to change Britain’s relationship with the European Union is gathering momentum after fellow leaders signaled they are willing to find compromises on his demand for curbs on welfare.
Rather than the fight that many analysts said Cameron needed to satisfy British voters, the prime minister left negotiations in Brussels on Thursday night with an optimistic message about the prospects for a deal at the next European summit in February.
“There is momentum — there was enormous support in the room for finding ways of keeping the U.K. in the EU,” Cameron told reporters.
Macro Economic Indicators
Inflation rate (Y-o-Y) for November 2015 9.37%
Monetary Policy Rate current 11.00%
FX Reserves (Bn $) as at December 16, 2015 29.447
Money Market Highlights
30 Day 8.2338
90 Day 10.2644
180 Day 12.8630
USD 1 Month 0.3600
USD 2 Months 0.4405
USD 3 Months 0.5325
USD 6 Months 0.769
Tenor Maturity Yield (%)
91d 17-Mar-16 3.28
182d 30-Jun-16 4.30
364d 01-Dec-16 5.32
2y 31-Aug-17 9.25
3y 30-May-18 9.83
5y 13-Feb-20 11.21
Indicative Currency Exchange Rates
USDNGN 197.00 198.97
EURUSD 1.0753 1.0956
GBPUSD 1.4839 1.5042
USDJPY 122.05 122.08
USDCHF 0.98895 0.9991
GBPEUR 1.3661 1.3865
USDZAR 15.1280 15.3307