Financial market products & services update

*Financial markets.

*Financial markets.

06 October 2016, Sweetcrude, Lagos — Local and international financial market products and services update.
NIGERIA: Nigeria’s economy is likely to shrink 1.3 percent in 2016, the National Bureau of Statistics executive said on Wednesday, a sharp downward revision of its estimates he said was prompted by sharp falls in the naira after dollar peg was dropped. The NBS had predicted the Nigerian economy to grow 3.8 percent in 2016, but low oil prices have hammered the OPEC member’s government income and the naira, and recession first appeared in the second quarter with 2.1 percent contraction. A contraction in 2016 would mark Nigeria’s first year of recession in 25 years. NBS head Yemi Kale said the economy was likely to shrink in the third quarter.

FIXED INCOME: It was a muted day for bonds, traded volume was low and there wasn’t much price action either. The rally after the auction circular release has cooled off and the market might wideN in the coming days before the auction. Short-dated t-bill maturities continued to rally. The 1-4 months tenor bucket rally another 45bps, while the rest of the curve was relatively flat. We expect CBN to issue OMO bills today because of the N160bn maturity, and we might see the short dates push back up. O/N still closed at 15% and money market liquidity is at N20bn. At the PMA, CBN sold 91 days at 13.90%, 182 days at 17.09% and 364 days at 18.25% discount.

FX: The trading range for yesterday $/NGN 303.10 – 316.61.

U.S.: Evidence that the so-called natural rate of interest has fallen to low levels could mean the economy is stuck in a low-growth rut that could prove hard to escape, Federal Reserve Vice Chair Stanley Fischer said on Wednesday. Speaking to a central banking seminar in New York, the Fed’s second-in-command said he was concerned that the changes in world savings and investment patterns that may have driven down the natural rate could “prove to be quite persistent…We could be stuck in a new longer-run equilibrium characterized by sluggish growth.” As a result, he said, central bankers may face a future where the short-term interest rates set by policymakers never get far above zero, and the unconventional tools used during the financial crisis become a “recurrent” fact of life.

E.U.: The Bank of England, which signalled a few weeks ago that a fresh interest rate cut was likely next month, has been put on the spot by signs that Britain’s economy has weathered the initial shock of the Brexit vote better than expected. While the prospect of a rocky divorce from Europe means Britain may need further stimulus from the BoE at some point, a survey of the huge services sector released on Wednesday suggested the economy has so far avoided a sharp slowdown. The survey added to other indicators that have undermined the view held by many private-sector economists until recently that Britain was heading for a recession after it voted to leave the European Union.

COMMODITIES: Oil halted gains below $50 a barrel as investors weighed falling U.S. stockpiles against speculation the recent price rally will encourage producers to raise output. Brent for December settlement lost as much as 37 cents, or 0.7 percent, to $51.49 a barrel on the London-based ICE Futures Europe exchange.

Macro Economic Indicators
Inflation rate (Y-o-Y) for August 2016,      17.61%
Monetary Policy Rate current                      14.00%
FX Reserves (Bn $) as at Sep 29, 2016,     24.566

Money Market Highlights

O/N                         14.8333
30 Day                    18.0769
90 Day                    19.1393
180 Day                  19.9006
USD 1 Month         0.5272
USD 2 Months       0.6501
USD 3 Months       0.8643
USD 6 Months       1.2514
USD 12 Months     1.06675

Benchmark Yields
Tenor     Maturity     Yield (%)

91d            29-Dec-17      17.19
182d          23-Mar-17     17.16
364d          21-Sep-17      22.47
2y               27-Apr-17      19.72
3y               29-Jun-19     14.58
5y               15-Jul-21       14.91

Indicative Currency Exchange Rates
Bid          Offer

USDNGN        314.00         315.00
EURUSD         1.1099         1.1301
GBPUSD         1.2621          1.2823
USDJPY          103.60         103.63
USDCHF         0.97065      0.9808
GBPEUR         1.1257          1.1461
USDZAR         13.6602       13.8636
JPYNGN         2.9997          3.1003
CHFNGN        322.77          324.46
EURNGN        352.96         354.32
GBPNGN        400.35         401.75

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