See what happens to Naira , After FG gets $925M lifeline loan for Crude
FG Secures $925m Boost Amidst Weakening Naira
As the naira edges closer to the 1,500/$ mark in both official and parallel markets, the Federal Government has obtained a $925 million lifeline from Afrieximbank to stabilize the foreign exchange market and meet dollar obligations.
The local currency has recently faced significant pressure against the US dollar and other major global currencies due to a shortage of foreign exchange. The Central Bank of Nigeria has attempted various measures to strengthen the naira, which had neared 1,100/$ in early April. Despite these efforts, forex shortages and speculative activities have continued to impact the naira’s value.
On Thursday, the Federal Government received $925 million from the African Export-Import Bank, coinciding with the naira closing at N1,481 to the dollar in the official market. Afrieximbank announced this disbursement as part of a $3.3 billion crude oil-backed prepayment facility, sponsored by the Nigerian National Petroleum Company Limited (NNPC).
This facility aims to assist the Federal Government in meeting dollar obligations, support the Central Bank of Nigeria in stabilizing the forex market, and provide funding for NNPC. The latest $925 million disbursement brings the total funded amount to $3.175 billion. This funding was sourced from a consortium of lenders, including Oando Group and Sahara Energy Resource Limited.
Afreximbank’s President, Prof. Benedict Oramah, highlighted the bank’s role in fostering economic stability and growth across Africa, emphasizing this facility’s importance for Nigeria’s economic priorities. NNPC’s Group CEO, Mele Kyari, praised Afrieximbank for its support and commitment to Nigeria’s growth.
The NNPC first secured the $3.3 billion loan from Afrieximbank in August 2023, intended to stabilize Nigeria’s exchange rate. By January 2024, NNPC announced plans to prepay future royalties and taxes using the facility. They adopted a conservative crude price benchmark of $65/barrel to ensure financial stability and mitigate default risks.
Meanwhile, the naira appreciated slightly on Thursday, closing at N1,481 from its previous low of N1,488.60/$ on Wednesday. Market data indicated a high of N1,505 and a low of N1,401 during trading hours, with a daily turnover of $213.31 million.
Fitch Ratings recently projected that the naira would average about N1,200/$ this year, ending around N1,450/$. The ratings agency expects a gradual depreciation, contingent on the momentum of foreign exchange reforms.
The $3.3 billion loan has sparked mixed reactions, but NNPC’s Chief Corporate Communications Officer, Olufemi Soneye, clarified that the arrangement was essential to address Nigeria’s forex shortage. He highlighted that unmet obligations by the Central Bank, amounting to over $6 billion as of June 2023, had severely pressured the nation’s external reserves and devalued the naira. This pre-financing arrangement is designed to provide the Federal Government with the necessary foreign exchange to stabilize the currency and support new projects.
In August 2023, NNPC emphasized that the loan would support the Federal Government’s fiscal and monetary reforms aimed at stabilizing the exchange rate market. The joint signing of the loan agreement took place at Afrieximbank’s headquarters in Cairo, Egypt.
