A Review of the Nigerian Energy Industry

Financial market products & services update

*Financial instruments.

06 June 2018, Sweetcrude, Houston, Texas — The local and international financial market products and services update.
NIGERIA: Moody’s Investors Service has described the perpetual delay in passing Nigeria’s annual budget as a reflection of the weakness of institutions in the country. Moody’s Senior Analytical Advisor for Africa, Mr. Aurélien Mali said this in an interview with Thisday in Lagos. More than two weeks after Nigeria’s Senate passed the 2018 Appropriation Bill following the consideration and adoption of the report by the joint National Assembly Committee on Appropriation, President Muhammadu Buhari was yet to sign it into law as at Monday. The budget of N8.6 trillion was passed six months after the president presented it to the legislature.

FX: The pattern was unchanged in the I&E window with liquidity decent at the $/N 361.00 level. The week starts with a strong turnover of $592.31m for Monday and $195.37m yesterday, We expect levels to close the week around $/N 359.50 – 361.00. Results of the wholesale auction were released yesterday and banks were directed to allocate to targeted sectors. NIFEX also printed a fresh high of $/N 341.44 yesterday which is further closing up the gap between the NAFEX and NIFEX printing.

FIXED INCOME: The weak trend in bond market continued yesterday, yields across the curve pulled wider by close of the session.

Given the ample naira liquidity, the market was on the lookout for another OMO yesterday but the CBN stayed away. In the absence of OMO, buyers returned to the bill market with interest across the curve.

Market liquidity is estimated at N350bn and should sustain tone in bills until the expected OMO auctions on Thursday.

CHINA:
China’s central bank stepped up injections of cash to the financial system, as lenders face a seasonal liquidity squeeze complicated by an oncoming U.S. Federal Reserve rate hike.

The People’s Bank of China offered 463 billion Yuan ($72.4 billion) via its Medium-term Lending Facility to commercial lenders on Wednesday. When taking into account of 259.5 billion Yuan of such contracts maturing this month, the PBOC has pumped in a net 203.5 billion Yuan via such monetary policy tools so far this month, the most since March 2017, data compiled by Bloomberg show.

E.U.: The European Central Bank is increasingly confident that inflation is rising back to its target and will next week debate whether to gradually unwind bond purchases, ECB chief economist Peter Praet said on Wednesday.

Having revived growth with an unprecedented 2.55 trillion euro ($2.99 trillion) bond purchase scheme, ECB policymakers have been debating whether to end the purchases by the close of the year as the threat of deflation is long gone and the bloc is on its best growth run in a decade.

COMMODITIES: Oil rose for a second day as an industry report showing a drop in American crude stockpiles helped counter fears that supplies may gain after the U.S. was said to ask OPEC to boost output.

Futures in New York climbed as much as 0.7% after a 1.2% advance on Tuesday. The American Petroleum Institute was said to report nationwide crude inventories fell over 2 million barrels last week. Meanwhile, the U.S. government has asked Saudi Arabia and some other members of the Organization of Petroleum Exporting Countries to increase output by about 1 million barrels a day, according to people familiar with the matter.

Macro Economic Indicators
Inflation rate (Y-o-Y) for April 2017             12.48%
Monetary Policy Rate current                        14.00%
FX Reserves (Moving Avg Bn $) as at May 30, 2018,    47,622

Money Market Highlights
NIBOR (%)

O/N                          3.6250
30 Day                   13.1281
90 Day                   13.7344
180 Day                 14.3608
LIBOR (%)
USD 1 Month        2.01297
USD 2 Months      2.11838
USD 3 Months      2.31381
USD 6 Months      2.48400
USD 12 Months    1.72400

Benchmark  Yields   
Tenor     Maturity      Yield (%)
91d         30-Aug-18    12.18
182d       06-Dec-18    12.91
364d       04-Apr-19    13.49
2y           13-Feb-20    12.52
3y           15-Jul-21     13.27
5y           27-Jan-22    13.43

Indicative Currency Exchange Rates
Bid       Offer

USDNGN (I&E)  360.00     362.00
EURUSD              1.1650    1.1852
GBPUSD              1.3321    1.3523
USDJPY               110.08    110.11
GBPEUR             1.1321    1.1525
USDZAR             12.7597  12.9637
EURNGN            423.52     424.87
GBPNGN            483.86     485.24

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