Financial market products & services update

*Financial markets.

*Financial markets.

25 May 2016, Sweetcrude, Houston — Local and international financial market products and services update.
NIGERIA: The Central Bank of Nigeria, CBN, on Tuesday stated that it would introduce greater flexibility in the inter-bank foreign exchange market structure and retain a small window for critical transactions for prospective investors. It equally warned that the Nigerian economy might further contract in the second quarter (Q2) of this year into a full-blown recession, as some of the conditions which led to the contraction in the gross domestic product, GDP, growth rate in the first quarter remained largely unresolved. The Nigerian economy contracted by -4 percent in the first quarter of 2016, signalling the deteriorating economic conditions in the country and its first economic contraction in 25 years. The central bank added that the weak outlook for growth, which was signaled in July 2015 when it warned of the risk of a recession, could extend to the second quarter of 2016. Addressing journalists at the end of the two-day meeting of the Monetary Policy Committee, MPC, the CBN Governor, Godwin Emefiele, said the central bank resolved to introduce greater flexibility in the interbank foreign exchange market structure and to retain a small window for critical transactions for prospective investors.

FX: The CBN weekly Special intervention results have been released. The intervention rate was maintained at $/NGN 197.00.

FIXED INCOME: Bond market continued trading with the expectation that the policy rate would be unchanged. The rally in bonds continued as purchases were done to cover positions. There were a few unbelievers selling into the rally as they expected some more tightening. The long end of the bill curve also felt the buying effect from the bonds. At the MPC, committee unanimously agreed to retain the MPR at 12%. We expect this decision to cause more demand for both bills and bonds today as more short positions are expected to be covered.

CHINA: Chinese officials plan to ask their American counterparts in annual talks next month about the chance of a Federal Reserve interest-rate increase in June, according to people familiar with the matter. The Chinese delegation will try to deduce whether a June or a July rate rise is more likely, as their nation’s policy makers prepare for the potential impact on financial markets and the yuan, the people said, asking not to be named as the discussions were private. In China’s view, if the Fed does lift borrowing costs, a July move would be preferable, the people said.

U.K.: Government borrowing was higher than analysts’ expectations in April after forecasts for company tax payments fell short of hopes. The Office for National Statistics said borrowing, excluding support for state-owned banks, was £7.2bn in April. That was down from £7.5bn last year but higher than analysts’ forecasts of about £6.6bn. The ONS also revised up its estimate of the amount borrowed in the financial year to March to £76bn. That was £2bn more than its previous estimate, and £3.8bn above the prediction that had been made by the independent Office for Budget Responsibility (OBR), which produces forecasts for the government. The main reason for the lower figure was weaker-than-expected income from workers’ national insurance contributions. The ONS says annual borrowing has been falling in general since the peak reached in the 2009-10 financial year. Last year’s figure was £15.7bn lower than for the year before and is half that borrowed in 2009-10.

COMMODITIES: Oil extended its advance to near $50 a barrel as weekly U.S. industry data showed crude stockpiles declined, easing a glut. Brent for July settlement increased as much as 78 cents, or 1.6 percent, to $49.39 a barrel on the London-based ICE Futures Europe exchange.

Macro Economic Indicators
Inflation rate (Y-o-Y) for April 2016,           13.70%
Monetary Policy Rate current                       12.00%
FX Reserves (Bn $) as at May 20, 2016,     26.569

Money Market Highlights

O/N                           8.0833
30 Day                     10.6337
90 Day                     12.1621
180 Day                   13.9829
USD 1 Month         0.4460
USD 2 Months       0.5469
USD 3 Months       0.6623
USD 6 Months       0.9579
USD 12 Months     1.06675

Benchmark Yields
Tenor      Maturity      Yield (%)

91d            18-Aug-16       9.25
182d         17-Nov-16       10.02
364d        04-May-17       12.92
2y             27-Apr-17        12.21
3y             29-Jun-19       13.42
5y             13-Feb-20       13.70

Indicative Currency Exchange Rates
Bid        Offer

USDNGN         197.50      199.50
EURUSD          1.1041      1.1243
GBPUSD          1.4540     1.4742
USDJPY           110.25      110.28
USDCHF          0.98745  0.9976
GBPEUR          1.3038     1.3242
USDZAR          15.5395    15.7429

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