Financial market update

31 May 2012, Sweetcrude, Lagos – Local and international financial market update.
NIGERIA: Nigeria’s government has spent 451 billion naira ($2.8 billion) in arrears on fuel subsidy claims from 2011, double the projected amount, the Finance Ministry said. The NNPC and the Petroleum Products Pricing and Regulatory Agency had estimated arrears of 232 billion naira, the Abuja-based ministry said in an emailed statement on Tuesday. The government’s fuel subsidy budget for 2012 is 888 billion naira.

EUROPE: European stocks dropped the most in a week as Italy failed to meet its maximum target at a debt sale, Spain struggled to bolster its banking system and a Greek poll showed increased support for parties opposed to spending cuts. The Stoxx Europe 600 Index declined 1.5 percent to 240.56 at the close in London yesterday. The benchmark measure has tumbled 12 percent from this year’s high on March 16 amid growing concern that Greece will be forced to leave the euro currency union.

CHINA: While the Chinese government is vowing not to spend as it did during the 2008 global financial crisis, the most accurate analysts say the benchmark index for the nation’s stocks will keep rising. The Shanghai Composite Index is set to gain 15 percent from Tuesday’s close to 2,750 by year-end as slowing inflation allows the government to loosen monetary policy and banks to lend more to companies, according to Beijing Gao Hua Securities Co., the firm with the most correct predictions for yuan-denominated A shares in the two years to January 2012, based on Bloomberg Rankings.

Bonds – Trading volumes are still very low yesterday, yields continued to inch up across the curve from an average 3bps on the long end to about 12bps on the short end.

Bills – The CBN as expected continued with its OMO offering on Wednesday [results below]. Secondary market activity continues to be quite volatile with buying pressure across board but focused on the short dated maturities.

Money Market – OBB and unsecured O/N rates still staying low at 10.25% as the system is still very liquid on the back of the inflows from the bond maturities of N290billion last week and FAAC of approximately N280billion Expectation is that the CBN will keep coming out to offer OMO in an attempt to mop up this liquidity.

CBN WDAS AUCTION
Offered: 250mio Sold: 250mio
Marginal rate: 155.75
Weighted average: 155.83
No. of Banks: 18

FX
                          Hi              Low         Close         Prev.Close
USD/NGN 160.00/10   159.25/35  159.80/90  158.85/95