News Desk
The Nigerian National Petroleum Company Limited on Wednesday, secured the $3 billion emergency loan from the African Export-Import Bank to ease pressure on the naira.
However, more facts have emerged on how the $3 billion facility secured by the Nigerian National Petroleum Company Limited will enable the Federal Government to stabilize the foreign exchange market and boost the value of the naira against the dollar.
The agreement for the loan, which was sealed on Wednesday in Cairo, saw the Group Chief Executive Officer of NNPC Ltd., Mallam Mele Kyari, sign for the National Oil Company, while Dr. George Elimbi, Executive Vice President of Afreximbank, signed for the bank.
The loan would enable NNPCL to defray taxes and royalties in advance and provide government dollar liquidity to stabilize the naira.
The disbursement of the loan will be in tranches based on government requirements, while the repayment will be against future crude oil production.
This will assist in the appreciation of the value of the naira, which will translate to a lower cost of fuel and further stem the increase in the cost of petrol.
The implication of this is that a stronger Naira will mean lower prices against the current level and won’t require any subsidies.
This will enable the government to continue the implementation of the deregulation policy in line with the implementation of the Petroleum Industry Act 2021.
The Special Adviser to the President on Media and Publicity, Mr. Ajuri Ngelale, noted this much when he used his X handle (formerly Twitter) to lay credence to the importance of the agreement between NNPCL and Afreximbank.
He had tweeted, “This new FX accretion is to enable NNPCL defray taxes & royalties in advance and provide the FGN w/ USD liquidity to stabilize NGN via incremental releases based on FGN needs. Stronger NGN = Lower Fuel Costs. This is a major buffer against the need to re-engage in the subsidy regime.”
At an event held in Cairo, Egypt, both parties jointly signed a commitment letter and Termsheet for the emergency loan of $3 billion.
This transaction will provide some immediate disbursement that will help NNPCL support the Federal Government in its ongoing fiscal and monetary policy reforms aimed at stabilizing the exchange rate market.
The move is expected to boost foreign exchange liquidity in the country and further drive down the exchange rate between the naira and the dollar.
Analysts believe that the deal is one of the immediate fallouts of the meeting between President Bola Tinubu and the acting Governor of the Central Bank of Nigeria, Folashodun Shonubi, on Monday, in which the government threatened to sanction those engaging in underhand undertakings in the FX market, including the parallel market.
This is the fourth transaction being consummated between NNPCL and AFREXIM Bank over the last 3 years and goes to further consolidate the mutual relationship between the two entities.
Both Nigeria and NNPCL are shareholders in AFREXIM Bank, with the sole purpose of enhancing investments and growing prosperity in Africa.
In the early hours of Wednesday, data from AbokiFX, an online platform that tracks the exchange rate on the parallel market, reflected that the naira gained exchange rate momentum against the dollar at the parallel market to trade at N910/$1 compared to N942/$1 it closed at on Tuesday, according to data from AbokiFX, an online platform that tracks the exchange rate on the parallel market.
