A Review of the Nigerian Energy Industry

Financial market products & services update

*Financial markets.

05 April 2018, Sweetcrude, Lagos — The local and international financial market products and services update.
NIGERIA: Nigeria’s central bank kept its main interest rate at 14% on Wednesday in an attempt to curb inflation especially in food prices, Governor Godwin Emefiele said. The economy emerged from its first recession in 25 years in 2017 but growth remains fragile, although higher oil prices and debt sales over the last few months have helped the continent’s biggest crude producer to accrue billions of dollars in foreign reserves. Emefiele said the nine committee members at the first rate-setting meeting of the year voted unanimously to hold the rate at a record high of 14%, where it has been since July 2016 to support the naira and help curb inflation. “The committee noted that at 14% the policy rate was tight enough to rein in current inflationary pressures,” he said. Most analysts polled by Reuters had expected rates to be kept on hold with cuts seen later this year. Recent economic data had suggested there was scope for a rate cut. Inflation fell to an almost one-year low in February at 14.33%, while the country’s dollar reserves rose to $46.2 billion at the end of March.

FX: Muted activity in the I&E window yesterday with levels unchanged between $/N 358.00 – 361.00. Yesterday’s turnover stood at $170.21m, 39% lower than the previous session. Results of Tuesday’s wholesale auction were released yesterday.

FIXED INCOME: T-Bill market saw most of the action yesterday as street priced in a possible rate cut at the MPC. Oct and Nov bills traded sub 13.50% discount dragging the rest of the curve lower as well before some profit taking from the unbelievers. Bond yields also edged lower though on less volumes.

Following the unanimous MPC decision to keep its monetary policy stance unchanged, we expect a correction in the bill market.

Also anticipated is an OMO auction to mop up naira liquidity expected to be in excess of 1 trillion by today.

U.K: Asset managers must assess each year how much value for money they offer investors, Britain’s markets watchdog said on Thursday, stopping short of tougher measures called for by critics of the 7 trillion pound ($9.84 trillion) sector.

The Financial Conduct Authority said that asset managers will have 18 months to prepare for a requirement from September 2019 to make an annual assessment of value, “as part of their duty to act in the best interests of the investors in their funds”. Fund managers will also have to appoint at least two independent directors to their boards, the FCA said in a statement.

U.S: The Trump administration indicated it’s willing to negotiate with China on escalating frictions between the world’s two biggest economies, helping to ease fears among investors of a tit-for-tat trade conflict.

U.S. Commerce Secretary Wilbur Ross said China’s response isn’t expected to disrupt the U.S. economy. In an interview on CNBC on Wednesday, he said China’s reaction “shouldn’t surprise anyone.” He said the U.S. isn’t entering “World War III” and left the door open for a negotiated solution.

COMMODITIES: Oil rose toward $64 a barrel as investors received a reprieve from growing American crude stockpiles and on signs that trade tensions between the U.S. and China may ease.

Futures gained as much as 0.7% in New York. Prices erased most of their losses on Wednesday after data showed supplies stored in U.S. tanks shrank the most since January, in contrast to a forecast for a 2 million-barrel gain. Meanwhile, risk assets rebounded after Chinese and American officials indicated they’re willing to negotiate on escalating frictions, helping ease fears that a trade war may derail the strongest global expansion in years.

Macro Economic Indicators
Inflation rate (Y-o-Y) for February 2017                 14.33%
Monetary Policy Rate current                                  14.00%
FX Reserves (Moving Avg Bn $) as at March 28, 2018,     46.208

Money Market Highlights
NIBOR (%)

O/N                         4.2083
30 Day                  14.1074
90 Day                  14.4875
180 Day                16.3525
LIBOR (%)
USD 1 Month       1.88313
USD 2 Months     1.99944
USD 3 Months     2.31175
USD 6 Months     2.45380
USD 12 Months   1.72400

Benchmark Yields
Tenor      Maturity      Yield (%)

91d          05-Jul-18      12.92
182d        04-Oct-18     14.56
364d       14-Mar-19     15.10
2y           13-Feb-20     13.66
3y           15-Jul-21      13.68
5y           27-Jan-22     13.50

Indicative Currency Exchange Rates
Bid       Offer

USDNGN (I&E)     359.00     360.50
EURUSD                1.2164     1.2395
GBPUSD                1.3961     1.4163
USDJPY                 107.12     107.14
GBPEUR               1.1363     1.1566
USDZAR               11.7981   12.0038
EURNGN              440.88     442.60
GBPNGN              505.54     506.95

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