29 February 2016, Sweetcrude, Lagos — Local and international financial market products and services update.
NIGERIA: The Nigerian government has removed nearly 24,000 workers from its payroll after an audit revealed they did not exist, the Finance Ministry has said. The move has enabled a monthly saving of around $11,5m (£8m).
The audit is part of an anti-corruption campaign by President Muhammadu Buhari, who took power last year. Corruption and mismanagement have long been a challenge to Nigeria’s growth, and the government has promised to cut costs to face an economic slowdown.
Nigeria is Africa’s biggest economy and the continent’s top oil producer, and its finances are under strain due to the recent collapse in oil prices. The country has also faced rising inflation, a stock market slump and the slowest pace of economic growth in more than a decade.
FIXED INCOME: 195 day paper (8 Sep ‘16) was offered at Friday’s OMO auction. The auction was well bid, with total sales of N293.76bn clearing at 7.75% discount (8.08% yields). Activities remains tepid in bonds but the bearish sentiments continue to linger. T-Bill market saw yields move north, because of the OMO auction overall +28bps to close at 5.87% yield.
FX: The CBN weekly special auction for last week held on Thursday the 25th February and intervention rate at $/NGN 197.00. Results are expected today.
COMMODITIES: Talk of an output freeze by OPEC and Russia along with falling U.S. production spurred money managers to bet oil is ready for a rebound.
Prices have risen 13% since Saudi Arabia, Russia, Venezuela and Qatar tentatively agreed on Feb. 16 to cap production at January levels. U.S. crude output dropped for a fifth week, government data showed Feb. 24.
Hedge funds and other speculators increased their net-long position in West Texas Intermediate futures and options by 14% to the highest level since November in the week ended Feb. 23, according to U.S. Commodity Futures Trading Commission data.
CHINA: The Yuan weakened for a seventh day, the longest run of declines since December, as China’s central bank lowered the currency’s reference rate and the dollar advanced amid data showing a strengthening U.S. economy.
The People’s Bank of China reduced its reference rate for the fifth day in a row to 6.5452 a dollar. The Yuan’s drop suggests that the People’s Bank of China is paying more importance to moves against a basket of currencies, according to Oversea-Chinese Banking Corp. A Bloomberg replica of the CFETS RMB Index, which was unveiled in December and measures the Yuan against 13 exchange rates, shows the Chinese currency has been trading in a range of 101 and 99 in the past eight weeks.
U.S: The derivatives market is sending unprecedented signals that the Federal Reserve is mistaken in its policy-rate path.
Even as officials argue that higher borrowing costs are warranted, the bond world sees the potential for the shortest cycle of rate increases in almost two decades. At one point last week, traders saw the Fed as more or less done after December’s liftoff, a stance that Deutsche Bank AG calls unheard of after tightening has just begun. There’s a similar aberration in how derivative simply the Fed target will barely budge for two years, something typically seen only before central-bank stimulus, TD Securities Inc. says.
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Macro Economic Indicators
Inflation rate (Y-o-Y) for January 2016 9.62%
Monetary Policy Rate current 11.00%
FX Reserves (Bn $) as at February 25, 2016 27.807
Money Market Highlights
30 Day 7.6588
90 Day 9.0713
180 Day 10.3698
USD 1 Month 0.4385
USD 2 Months 0.5230
USD 3 Months 0.6351
USD 6 Months 0.8806
USD 12 Months 1.06675
Tenor Maturity Yield (%)
91d 26-May-16 3.85
182d 01-Sep-16 7.01
364d 16-Feb-17 9.08
2y 31-Aug-17 10.40
3y 30-May-18 10.49
5y 13-Feb-20 11.90
Indicative Currency Exchange Rates
USDNGN 197.00 199.50
EURUSD 1.0839 1.1042
GBPUSD 1.3793 1.3995
USDJPY 112.98 113.00
USDCHF 0.99245 1.0026
GBPEUR 1.2598 1.2802
USDZAR 16.0179 16.2135
CHFNGN 200.11 201.80