Naira appreciates as NNPCL boosts forex supply with $3bn loan

The Naira on Wednesday, August 17, recorded significant gain against the dollar in the parallel market and the official Investors and Exporters, I&E window even as the forex market received a major supply boost as the NNPC Limited secured a $3 billion facility from the AfreximBank aimed at stabilising the exchange rate.

Telescope.ng gathered that the Vanguard survey showed that the Naira appreciated by N28 or 3.8 per cent in the parallel market, as the exchange rate fell to N885 per dollar from N920 per dollar on Tuesday.

The Naira also appreciated by N21.44 per dollar or 3.25 per cent in the official I&E window as the indicative exchange rate fell to N759.86 per dollar from N781.30 per dollar on Tuesday.

Parallel market sources who spoke to Vanguard attributed the appreciation of the Naira to the recent pronouncement of the Acting Governor, Central Bank of Nigeria (CBN), Folashodun Shonubi, which signalled that the apex bank will soon unveil measures to boost forex supply, tackle speculators in a bid to address continued depreciation of the naira.

$3bn AfreximBank loan

In line with this trend, and in a bid to support the ongoing fiscal and monetary policy reforms of the federal government, the NNPC Limited yesterday said it has signed a Commitment Letter and Term Sheet with AfreximBank for an emergency $3 billion crude oil repayment loan.

The company said the agreement was jointly signed by both parties at the bank’s headquarters in Cairo, Egypt.

NNPC Limited, in a statement made available to Vanguard, explained that the loan “will provide some immediate disbursement that will enable the NNPC Ltd to support the Federal Government in its ongoing fiscal and monetary policy reforms aimed at stabilizing the exchange rate market”.

Recall that last week, the Federal Government reported a 13.6 per cent drop in daily crude oil production in the month of July, leaving the country seriously short of dollar revenues from crude oil export.

The Nigerian Upstream Petroleum Regulatory Commission, NUPRC, disclosed that production averaged 1.08 million barrels per day compared to 1.25mbpd recorded in June, the latest production data from the, has indicated.

The July production figure was a major setback for the government which has a production target of 1.69 million barrels per day in the 2023 budget. The volume of production was also significantly lower than the 1.7 million barrels per day production quota allocated to the country by the Organisation of Petroleum Exporting Countries, OPEC.

How loan will be disbursed

Giving an explanation on how the loan will work, Senior Special Assistant to the President on Digital/New Media, O’tega Ogra in a series of tweets said the loan “is not a crude-for-refined products swap but an upfront cash loan against proceeds from a limited amount of future crude oil production.”

He tweeted: “Is this loan risky for NNPC Ltd. or the Nigerian Treasury? No. The exposure for NNPC Ltd. is very limited, covering just a fraction of their entitlements. Additionally, there are no sovereign guarantees tied to this loan.

“What’s the benefit of this loan to Nigeria? The loan will assist NNPC Ltd. in settling taxes and royalties in advance. It will also equip the Federal Government with the necessary dollar liquidity to stabilize the Naira, with limited risk.

“How will the loan be disbursed? The funds will be released in stages or tranches based on the specific needs and requirements of the Federal Government.