The goals of Nigeria’s Sovereign Wealth Fund (SWF), which include providing a countercyclical rainy day fund, as well as savings for future generations is being threatened by political bickering and oil revenue leakages. While the SWF announced last month that it made capital gains of NGN1.2 billion ($7.75 million) in the first quarter (Q1) of 2014 representing 0.5% return on total capital of $1.55 billion, the need to grow the fund through regular monthly transfers by the Government has failed to materialize. The Q1 return which amounts to 2% gains when annualized, are inadequate to achieve the funds goals, without regular transfer of excess oil revenue above the budgeted benchmark oil price. (Source: Businessday)
Interbank rates advanced across all maturities an average 24 basis points across all maturities, with the Overnight rate climbing 25 basis points to close at 10.75%.
Fixed Income Market
The T-bills market closed the day flat with yields trading mixed across all maturities. With no 364DTM paper on auction at Wednesday’s Primary Market Auction (PMA), buying focus was evident on the 303DTM paper (the longest dated bill in the secondary market). At the Primary Market Auction (PMA) on Wednesday, the Apex bank would be offering NGN70 billion across 91DTM, 182DTM papers – a decrease from the last auction. We anticipate stop rates will hover around levels of the last auction.
Sentiments in the bond market reversed as foreign interest in short dated bonds compressed yields.
The Nigerian Interbank FX Market
The Naira strengthened against the U.S. dollar at the inter-bank FX market. Inter-bank stability was largely driven by dollar supplies by oil companies. It closed at NGN162.47/$.
Nigerian Stock Market Report
The Nigerian equities market witnessed a rebound on Tuesday after declining the first day of the week due to profit-taking. After shedding 0.64% the previous day, the market regained part of the depreciation as the Nigerian Stock Exchange (NSE) All-Share Index (ASI) grew by 0.24% to close at 42,861.78. Similarly, the market capitalization added NGN34 billion to close at NGN14.152 trillion.
Official data showed that U.K. factory output fell unexpectedly on the month of May, due to a broad based decline. The Office for National Statistics said the monthly falls in the U.K.’s industrial sector are not a sign of weakness in the economy.
However, it is likely the drop suggests a slowdown in the pace of growth a month manufacturers in the second quarter of the year. The data showed that manufacturing output fell 1.3% on the month in May, the first drop since November last year and the biggest decline since January 2013. Compared with May2013, manufacturing output rose 3.7% and has now increased for nine straight months.
Global Currency Update
The euro and pound rebounded from earlier losses against the U.S. dollar to end little changed on Tuesday, as investors remain cautious of buying the greenback given its inability to show a sustainable rally. The pound closed at $1.7138 on Tuesday, compared with $1.7132 on Monday. The euro finished the day at $1.3617, up from $1.3606 late Monday. In other trades, the dollar slipped against the yen, trading at ¥101.47 from ¥101.82 on Monday. The Australian dollar was trading at 0.9409 U.S. cents, up from 0.9371 U.S. cents.
Brent crude fell for its seventh straight session, hitting a one-month low below $110 a barrel on Tuesday on improved prospects for a rise in Libyan oil exports and easing fears of supply disruption in Iraq.
Gold ended the session slightly lower on Tuesday, as investors await clearer signs from the U.S. Federal Reserve that it is firmly on track to raise interest rates next year.
Hope you found today's financial report useful. Enjoy your day Lovelies! Kisses!