Financial market update

01 June 2012, Sweetcrude, Lagos – Local and international financial market update.
NIGERIA: Finance Minister, Dr Ngozi Okonjo-Iweala revised down the country’s growth forecasts to 6-7% on Wednesday, from 7-8% previously. During its budget presentation for 2012, the government had forecast 7-8% growth. Nigeria has already spent half of its 2012 fuel subsidy budget on arrears for last year, the finance ministry said on Wednesday, risking Africa’s second largest economy racking up further debt or running out of money to sustain huge subsidy payments.

EUROPE: The International Monetary Fund is not preparing financial aid for Spain, nor has the country asked for a loan, a spokesman for the fund said. Spain, which this month nationalized Bankia group, the country’s third-largest bank, is trying to shore up lenders and help cash-strapped regions as its own 10-year bond yields approach the 7 percent level that prompted bailouts in Greece, Ireland and Portugal.

CHINA: China needs to speed the pace of domestic reform and change its economic model to become less reliant on exports and reduce the impact of crises such as the one roiling Europe, said former banking regulator Liu Mingkang. Lui’s comments reflect growing concern that Wen Jiabao and the ruling Communist party need to do more to boost domestic demand and counter a deepening economic slowdown Europe’s debt crisis curbs demand for China’s exports.

INDIA: Indian stocks declined, with the benchmark index completing its worst May performance since 2006, as a government report showed the economy grew at the slowest pace in nine years. The BSE India Sensitive Index, or Sensex, slid 0.6 percent to 16,218.53 at the close on Thursday, its lowest level since May 25. The gauge lost 6.4 percent this month, the biggest decline since a 14 percent slump in May 2006. Discord in the ruling coalition and claims of graft have caused policy gridlock, impeding Prime Minister Manmohan Singh’s push to open up the economy.

Bonds – Still a quiet market on Thursday, looked like some demand feeding in early in the day but yields retraced close to opening levels before the close.

Bills – Yet another OMO offering yesterday but we might be reaching the end of the cycle as liquidity in the system has reduced significantly. Secondary market activity still largely bullish on the short end though only lightly and bearish on the long end.

Money Market – OBB and unsecured O/N rates are up 175-200 bps to 12.00% & 12.50%. The liquidity in the system is significantly reduced as a result of the mop up activity.

FX
Hi             Low         Close          Prev.Close
USD/NGN 160.05/15   159.60/70  159.80/90   159.80/90