$2.25bn Loan: Analysts Hail Afrexim Bank, UBA, NNPC’s Efforts To Ameliorate Nigeria’s Liquidity Constraints

Analysts, on Sunday hailed the African Export–Import Bank (Afreximbank)’s release of $2.25 billion out of the $3.3 billion foreign exchange (FX) support facility to Nigeria’s federal government in order to ameliorate the acute liquidity shortage in the country which had negatively impacted investors’ confidence.

Afrexim acting as the Mandated Lead Arranger along with United Bank for Africa (UBA) as Local Arranger, closed on a $3.3 billion liquidity support for Nigeria through a structured financing arrangement with NNPC Limited. 

It was further gathered that the transaction which released $2.25bn as the first tranche into the nation’s coffers is expected to ease the FX illiquidity in the country, while the balance is expected to come in January.

UBA is also acting as the Onshore Depository Bank for the transaction.

Other participants in the deal includes Gunvor, Sahara Energy and other major oil traders that are to join the parties.

The transaction which is in line with the Renewed Hope Agenda of President Bola Ahmed Tinubu’s commitment to stabilize the FX market and ease inflationary trends that has beleaguered the Nigerian economy since the administration took over.

Other developments that will liquefy the FX market are also in the works as leading domestic and African focused entities develop solutions towards resolving economic issues in the country.

Analysts who spoke on the development welcomed the initiative but urged the banks to support the economy in times of need. 

The Managing Director/Chief Executive, Dignity Finance and Investment Limited, Dr. Chijioke Ekechukwu, said the intervention will as help to fund the budget deficit as well as assuage FX concerns.

He said,” We have a budget deficit, which can only be funded by borrowing or selling government assets or both.

“The other fundamentals that could increase our revenue base have been stretched  ambitiously. 

“This gives the government no other option but to continue to borrow.”

Ekechukwu, however, noted that, “Although the $2.25 billion loan will bring FX respite in the short run, it is not likely to sustain the fx market for more than one month. 

“So, we expect the exchange rate to drop marginally with such injections, speculations, and other uses will, however, quickly drain the market of the available FX.”

Also, Chairman, Chartered Institute of Bankers of Nigeria (CIBN), Abuja Branch, Prof. Uche Uwaleke, said given the severe liquidity challenge currently experienced in the 

Nigerian Autonomous Foreign Exchange Market (NAFEM) any  forex inflow is welcomed.

He said, “It’s a case of half bread is better than none.”

On his part, Managing Director/Chief Executive, SD&D Capital Management Limited, Mr. Idakolo Gbolade, said the Afrexim bank loan would ease the pressure on the Naira in the interim whilst other robust measures to be taken to increase FX revenue in the coming months will further help the resolve the FX change the country is facing.  

He said, “The Dangote and Port Harcourt refineries coming on stream in January will help retain the much needed FX in the system while others government initiatives to bring in foreign investors will start yielding fruits from Q1, 2024.”

James Emejo 

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