15 February 2016, Sweetcrude, Lagos — Local and international financial markets product and services update.
NIGERIA: Inflation pressures are rising in Nigeria despite the central bank pegging the currency for almost a year in the face of plunging oil prices.
Governor Godwin Emefiele has opposed devaluing the naira, imposing restrictions on imports and curbing foreign-currency supply instead to cope with a more than 45% slump in oil prices since the beginning of last year. Rather than protecting consumers — the justification used by President Muhammadu Buhari in rejecting calls for a weaker currency — the policy threatens to stoke inflation as it boosts import costs and pushes the naira to a record low on the black market.
FIXED INCOME: Despite no significant outflows or OMO auction on Friday, the O/N rate inched to 2% (+100bps) as liquidity managers funded accounts ahead of the weekend. Regardless of the subdued trading session on Friday, there were still buy enquires on both bonds and T-bills. Feb, mar and April bills saw most of the demand in the bill market. For bonds, demand was on the Jan 2026s (with bilateral trades going through at 12.25% area).
FX: The CBN weekly Special auction for last week held on Thursday and the intervention rate was maintained at $/NGN 197.00.
COMMODITIES: Oil stockpiles at an 86-year high and warnings of a persistent glut weren’t enough to keep money managers from betting that prices are ready for a rebound.
Speculators’ long positions in West Texas Intermediate crude climbed to the highest since June as oil sank toward a 12-year low, according to U.S. Commodity Futures Trading Commission data. Despite a 12% rally Friday, WTI finished last week down 4.7%. Prices on Monday slid 0.7% to $29.25 a barrel at 1:11 p.m. Singapore time.
JAPAN: Japan’s economy contracted in the final three months of 2015 as the nation struggles to break free of a cycle of expansion and contraction despite more than three years of the Abenomics program.
Gross domestic product shrank an annualized 1.4% in the three months ended Dec. 31, following a revised 1.3% gain in the third quarter, the Cabinet Office said on Monday. The median estimate of 33 economists surveyed by Bloomberg News was for a 0.8% decline.
Weakness in private consumption was the biggest contributor to the contraction at the end of last year, undermining Prime Minister Shinzo Abe’s policies to spur inflation and growth in the world’s third-largest economy.
CHINA: China’s Yuan surged by the most in more than a decade, catching up with dollar declines during a week-long holiday, after the central bank chief voiced support for the exchange rate and set its fixing at a one-month high.
The currency advanced 1.20%, the most since the nation scrapped a peg to the dollar in July 2005, to 6.4975 a dollar as of 2:12 p.m. in Shanghai, according to data compiled by Bloomberg. The offshore Yuan rose 0.26% to 6.4917, or 0.09% stronger that the onshore rate, compared with a 1% premium last week when mainland Chinese markets were shut for the Lunar New Year holidays.
The People’s Bank of China on Monday raised its daily fixing against the greenback, which restricts onshore moves to a maximum 2% on either side, by 0.3%, the most since November, to 6.5118. A gauge of dollar strength declined 0.8% last week, while the yen rose 3% and the euro advanced 0.9%.
Macro Economic Indicators
Inflation rate (Y-o-Y) for December 2015 9.60%
Monetary Policy Rate current 11.00%
FX Reserves (Bn $) as at February 10, 2016 27.859
Money Market Highlights
30 Day 7.9443
90 Day 9.3767
180 Day 11.1183
USD 1 Month 0.4305
USD 2 Months 0.5160
USD 3 Months 0.6182
USD 6 Months 0.8578
Tenor Maturity Yield (%)
91d 05-May-16 3.55
182d 11-Aug-16 7.52
364d 02-Feb-17 9.73
2y 31-Aug-17 10.68
3y 30-May-18 10.82
5y 13-Feb-20 12.00
Indicative Currency exchange Rates
USDNGN 197.00 199.50
EURUSD 1.1104 1.1306
GBPUSD 1.4421 1.4622
USDJPY 113.79 113.82
USDCHF 0.97605 0.9861
GBPEUR 1.2858 1.3062
USDZAR 15.7491 15.9526