A Review of the Nigerian Energy Industry

Financial market products & services update

*Financial markets.

11 December 2017, Sweetcrude, Houston, Texas — The local and international financial market products and services update.
NIGERIA: Fitch has cut its 2017 economic growth forecast for Nigeria to 1% from 1.5%, the ratings agency said on Friday. Nigeria returned to growth in the second quarter of 2017 after shrinking by 1.5% in 2016 but the recovery has been fragile because oil revenues remain depressed and hard currency is short. Speaking at a Fitch event in London, Jermaine Leonard, a director for sovereigns, added that although Nigeria’s 2018 budget had an oil production target of 2.3 million barrels per day (bpd), the Fitch forecast was just above 2 million bpd. Partly this was linked to a potential flare-up in violence in the Niger Delta as elections approach in 2019, he said. Fitch currently rates Nigeria at B+ with a negative outlook, which reflected the fact that there were still a lot of elements which could take it down, said Leonard. “But at this point, we are cautiously optimistic,” he said.

FX: Last week turnover in the I&E stands at $1.109bn and 60% of the trades were closed in the range of $/N 358 – 361. Week-on-week the daily average turnover is up by 9.2% and was driven by an upward trend in the stock market ahead of year-end earnings.

FIXED INCOME: W-o-W yields on average closing c150bps lower in bills and 50bp in bonds. The highest yielding (May, June, and July maturities) saw more compression and were unarguably the most actively traded in the billing space.
In the absence of the OMO auction, we expect yields to move further south.
There will be the bill and bond auction this week Wednesday (this will be the last bond auction for the year). N100bn will be offered across the 5 and 10yr while amounts for the bill auction are still expected.
The awaited Q1 bill calendar should validate the decision to roll over short-term debt via Eurobonds. To watch out for this week will be how the N200bn+ maturity on Thursday (special OMO & regular OMO) will be handled by the CBN.

U.K: Prime Minister Theresa May will hail “a new sense of optimism” in Brexit talks on Monday, telling parliament Britain and the European Union should sign off on a deal at a summit “to move forwards together” to discuss future trade ties.
May, weakened after losing her Conservatives’ parliamentary majority at a June election, emerged triumphant last week after rescuing an agreement to move the negotiations to unravel more than 40 years of union on to their second phase

CHINA: China’s consumer and factory inflation is moderating, giving policymakers another reason to stick to tougher financial regulations — rather than monetary tightening — in their battle to tame the growing debt pile.
The producer price index rose 5.8% in November from a year earlier, matching the projection in Bloomberg’s survey and slowing from 6.9% in October, data at the weekend showed. Consumer prices, meanwhile, climbed 1.7%, slower than the 1.8% forecast. The fresh data come as China’s top leaders throw their weight behind the de-risking drive, saying late Friday they will work to “effectively” control leverage in 2018.

COMMODITIES: Oil halted gains near $57 a barrel as U.S. drillers expanded the crude rig count to a three-month high, potentially countering efforts by OPEC and its allies to drain a global glut.
Futures slid 0.4% in New York after climbing 2.5% in the previous two sessions. Drillers boosted the rig count by two to 751 for a third weekly advance, according to Baker Hughes data on Friday. OPEC-led output curbs may end earlier than scheduled if the market re-balances by June, Kuwait’s Oil Minister Issam said.

Macro Economic Indicators
Inflation rate (Y-o-Y) for October 2017,           15.91%
Monetary Policy Rate current                            14.00%
FX Reserves (Bn $) as at December 07, 2017,  34.863

Money Market Highlights
NIBOR (%)

O/N                          7.0000
30 Day                   17.6812
90 Day                   18.5762
180 Day                 19.9476
LIBOR (%)
USD 1 Month        1.44438
USD 2 Months       1.48849
USD 3 Months       1.54878
USD 6 Months       1.72988
USD 12 Months     1.72400

Benchmark Yields
Tenor        Maturity        Yield (%)

91d            15-Mar-18       15.44
182d          07-Jun-18        14.90
364d          29-Nov-18       17.78
2y              15-Nov-19       14.80
3y              15-Nov-20       14.54
5y              27-Jan-22         14.35

Indicative Currency Exchange Rates
Bid          Offer

USDNGN (I&E)       358.00        359.00
EURUSD                  1.1685        1.1887
GBPUSD                  1.3285        1.3487
USDJPY                   113.44        113.47
GBPEUR                  1.1257        1.1461
USDZAR                  13.5668      13.7704
EURNGN                 422.99        424.35
GBPNGN                 480.52        481.92

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