President Bola Tinubu and his beleaguered Central Bank have received a three billion dollars firepower from Afrexim bank in Cairo to help them fight the so-called speculators that have ambushed the local currency but not many believe this will be enough to ease the FX volatility that has created several crises for Africa’s most populous nation.
BusinessDay learnt Wednesday morning that senior oil officials from the NNPC, NUPRC as well as the inland revenue service, FIRS were holed up in meetings with officials of AFREXIM Bank at the bank’s headquarters in Cairo hoping to ink a deal for an immediate foreign exchange support for Nigeria.
In a statement late Wednesday, the state oil company NNPC limited said the “NNPC and Afrexim Bank have jointly signed a commitment letter and termsheet for an emergency $3bn crude oil repayment loan.”
According to the statement, the “signing which took place today at the bank’s headquarters in Cairo will provide some immediate disbursement that will enable the NNPC limited to support the Federal government in its on-going fiscal and monetary policy reforms aimed at stabilizing the exchange rate market.”
BusinessDay understands that the loan may require the Nigerian government to secure it by pledging a portion of its royalty crude oil.
Some analysts have called the loan a mere band aid and others have questioned taking a loan of this size without a cabinet in place and without clear plans to combat insecurity in the Niger Delta and raising oil production to 2m barrels a day, increase land space under cultivation by no less than a million hectares while also stopping the banditry in many parts of the country that has driven farmers away from the farms.
It is not the first time that Nigeria has played herself into a corner and there are expectedly those who support or oppose the government going for yet another loan.
According to one oil industry player, “this is the sort of hot money that got the country where it is. No tie to production or reserves growth- just a payday load at huge cost! When we were in this sort of fix in the military era, we offered investment incentives (Reserves Addition Bonus) that resulted in the world class Bongas, Erha’s and Agbami’s, along with some crude sweeteners (the later for cash). Without impacting the fundamentals like raising crude oil production and reserves, I’m afraid what NNPCL is doing is akin to what Emefiele did with Morgan Stanley et al.”
But a lawyer who spoke to our reporter said, “things were beginning to get out of hand and Tinubu needed to slow down the pace of Exchange rate gyration to regain some control. A lot of the variables depend on the exchange rate., including the PMS price, electricity tariff etc. I support this move, so long as the application of the loan is not abused.”
The Naira was selling at 890 to the dollar at the parallel market Wednesday afternoon, a gain of about 30 Naira from Tuesday’s close.