August 16, (THEWILL) – The Nigerian National Petroleum Company Limited (NNPCL) said it has jointly signed a commitment letter and Termsheet with Afreximbank for an emergency $3 billion crude oil repayment loan that will stablise the volatile foreign exchange market.
The NNPCL in a statement on its website said the signing, which took place on Wednesday, August 16, 2023 at the bank’s headquarters in Cairo, Egypt, will provide some immediate disbursement that will enable it to support the Federal Government in its ongoing fiscal and monetary policy reforms aimed at stabilising the exchange rate market.
THEWILL recalls that the Acting Governor, Central Bank of Nigeria, Folashodun Shonubi, said on Monday that the apex bank will take measures that will impact currency markets in a couple of days after meeting President Bola Tinubu to discuss ways to improve dollar liquidity on the official market. He did not give details.
Nigeria has been battling severe fiscal and monetary policy reform challenges arising from acute shortage of dollars following a long period of decline in external investment inflow.
This impacted negatively on the nation’s external reserves resulting in over sixty percent depreciation of the Naira since the Central Bank of Nigeria abolished the multiple exchange rate system that provided the room to subsidise the Naira and hedged it from the effects of market forces.
According to the National Bureau of Statistics, NBS, Capital Importation (Foreign Investment) into Nigeria fell from $23.99 billion in 2019 to $5.33 billion in 2022. This represents a huge 77.8 per cent decline in a major dollar supply source into the country
Similarly, data from the CBN showed that Net Forex Inflow which stood at $76.38 billion in 2019 fell by 6.6 per cent to $70.65 billion in 2020. It declined by 25.4 per cent to $52.72 billion in 2021, and again by 28.3 per cent to $37.94 billion in 2022. Thus Net Forex Inflow into the country fell by half (49.5 per cent) within four years.
The NNPCL Afreximbank deal comes on the heels of the report by Agora Policy, an Abuja-based policy think-tank, on Monday, August 14, 2023, urging the Nigerian Government to explore avenues for a bilateral commitments that would improve dollar inflow to the economy.
In the report titled “Steadying Nigeria’s Fledgling Foreign Exchange Reform”, Agora Policy said Nigeria needs a big stash of dollars and fast to provide liquidity in the economy.
To address the present challenge, the think tank said policymakers must look to strike the iron while it is hot to avoid reform fatigue by seeking out sources of large dollar liquidity on concessional terms.
This, it said, can be achieved by exploring the option of a standby arrangement from multilateral agencies of significant scale ($5-10billion) with the objective of acquiring credibility.
Sam Diala is a Bloomberg Certified Financial Journalist with over a decade of experience in reporting Business and Economy. He is Business Editor at THEWILL Newspaper, and believes that work, not wishes, creates wealth.
