15 December 2016, Sweetcrude, Houston — Local and international financial market products and services update.
NIGERIA: The Federal Government has proposed a budget of N7.29tn for the 2017 fiscal year, with the primary goal of pulling the country’s economy out of recession and placing it on the path of growth.
President Muhammadu Buhari presented the estimates to a joint session of the National Assembly in Abuja on Wednesday in a speech lasting roughly 51 minutes. Although the anticipated revenue of N4.9tn for 2017 is higher by 28% than that of the current year, it has a deficit of N2.36tn, representing 2.18% of the Gross Domestic Product.
The President told lawmakers that the deficit would be financed through a projected borrowing of N2.32tn, broken into N1.06tn from external sources and N1.25tn from domestic creditors. However, the debts will be serviced with N1.66tn.
FX: Whispers in the market that CB FX auction will no longer come through and nothing major is expected to happen the interbank space for the rest of the year. USDNGN traded range was $/NGN 305.00 – 315.50.
FIXED INCOME: Bill market remained solid while bonds closed on a soft note. Bond auction prints came in higher than current secondary market levels – 5 year at 15.99%, 16.24% on the 10 year and 16.4348% yield on the 20 year. Appetite at the auction was definitely better than last month but we could see mixed reaction to the results today. Bill auction results were unsurprising – prints unchanged at 14.51%, 19.17% and 22.96% yield across the three tenors.
U.S.: For Janet Yellen, the labor market is great again. Yellen took a rare victory lap Wednesday, signaling the economy is strong and will improve further, allowing the Federal Reserve to continue to raise rates next year. She said the labor market probably doesn’t need fiscal stimulus to achieve full employment, and that monetary policy was about on target as inflation approaches their 2% goal. Asked if she’s comfortable with stocks near record highs, she said rates of return on equities are within normal ranges.
U.K.: Mark Carney’s policy balancing act may get trickier in 2017.The U.K. economy has shown continued strength since the last Bank of England decision on Nov. 3, and a weaker pound is stoking prices. That’s already prompted officials to shift their stance to neutral from easing, saying there are limits to their tolerance of faster-than-targeted inflation.
The complications could mount if the governor’s prediction for slower growth next year is coupled with a continued pickup in price growth. If the economy does falter, increasing inflation expectations may give officials less room to loosen policy as Britain begins its formal talks on leaving the European Union.
COMMODITIES: Oil held losses near $51 a barrel after gains in the dollar countered the fourth weekly decline in U.S. crude stockpiles and as Libya prepares this week to ship the first cargo from its largest export terminal in two years.
Futures were little changed in New York after losing 3.7% Wednesday, the most in about two weeks. The dollar held gains after the Federal Reserve raised interest rates, reducing appetite for commodities priced in the currency. U.S. stockpiles shrank by 2.56 million barrels last week, government data showed. Libya, exempt from OPEC’s output cuts, is working to reopen two of its biggest oil fields and readying to send the first overseas cargo from the port of Es Sider since 2014.
Macro Economic Indicators
Inflation rate (Y-o-Y) for October 2016, 18.33%
Monetary Policy Rate current 14.00%
FX Reserves (Bn $) as at Dec 12,2016, 25.048
Money Market Highlights
30 Day 15.3612
90 Day 18.0520
180 Day 21.1965
USD 1 Month 0.70389
USD 2 Months 0.78250
USD 3 Months 0.96344
USD 6 Months 1.29822
USD 12 Months 1.06675
Tenor Maturity Yield (%)
91d 16-Mar-17 14.08
182d 15-Jun-17 18.88
364d 02-Nov-17 21.82
2y 30-May-18 19.37
3y 29-Jun-19 15.74
5y 15-Jul-21 15.74
Indicative Currency Exchange Rates
USDNGN 314.50 315.00
EURUSD 1.0382 1.0584
GBPUSD 1.2430 1.2632
USDJPY 117.71 117.74
USDCHF 1.01905 1.0291
GBPEUR 1.1853 1.2057
USDZAR 13.9481 14.1515
JPYNGN 2.6297 2.7303
CHFNGN 312.74 314.39
EURNGN 338.92 340.28
GBPNGN 404.78 406.18