Fed Govt borrows $3bn from Afreximbank to stabilize the Naira
By Patience Ikpeme
The federal government has secured a $3 billion loan from Afrexim Bank in Cairo to combat currency speculators.
The Nigeria National Petroleum Company Limited (NNPCL) said it received the $3 billion emergency crude repayment loan from Afrexim Bank with the aim of providing relief for the Naira.
The company made this known on the NNPCL official X page on Wednesday.
An emergency $3 billion crude oil repayment loan commitment letter and term sheet were executed by the NNPCL and AfreximBank in Cairo the tweet said.
The loan securing ceremony took place on Wednesday at the bank’s head office in Cairo, Egypt.
According to the tweet “this will allow the NNPC Ltd. to support the Federal Government in its continuing reforms to fiscal and monetary policy with the goal of stabilising the exchange rate market”.
However, there are doubts that this loan will be enough to address the volatility in the foreign exchange market that has caused numerous crises in the country.
Senior officials from the NNPC, NUPRC, and FIRS have been in discussions with Afrexim Bank to finalize the deal.
The loan may require the Nigerian government to pledge a portion of its royalty from crude oil sales as collateral.
ome analysts argue that this loan is merely a temporary solution and question the decision to borrow without clear plans to address issues such as insecurity in the Niger Delta and increase oil production.
Others support the loan as a means to stabilize the exchange rate. The Naira was trading at 890 to the dollar in the parallel market on Wednesday.
Professor Uche Uwaleke, Director Institute of Capital Market Studies, Nasarawa State University Keffi, Nasarawa State in assessing the development said “much as intervention in the Forex market by the CBN is desirable, a more cost effective option would have been to use what is left of our external reserves as opposed to taking a loan from Afreximbank or even the IMF.
“The fact that the $3 billion loan was taken by NNPCL, a company still owned 100% by the federal government with the Ministries of Finance and Petroleum Resources holding 50% share each, makes it more worrisome.
“By implication, the federal government that is already saddled with huge debt is borrowing to lend to the CBN, when it should have been the other way round.
“Ultimately, this new loan contracted by the NNPCL adds to the growing public debt and may have been contracted at non concessionary terms being an emergency loan.
“It’s important that Nigerians, especially the National Assembly, are informed about the terms of the loan and the collateral security involved.
“Without doubt, this $3 billion loan on the balance sheet of NNPCL will make the company less attractive and possibly jeopardize the ongoing plan to private the company by listing it on the Nigerian Exchange”.
