Increasing concerns have emerged regarding the delay in the implementation of the highly anticipated $3 billion emergency loan from the African Export-Import Bank (Afrexim Bank) aimed at stabilizing Nigeria’s volatile foreign exchange market through the Nigerian National Petroleum Company Limited (NNPC).
The delay is reportedly contributing to the ongoing decline of the Nigerian Naira against the US dollar.
A report by Daily Trust revealed that since the announcement of the loan on August 16, the Central Bank of Nigeria (CBN) gross reserves have shown no significant increase, experiencing a minor decrease of 0.2% to $33.68 billion.
Initially celebrated as a relief to the forex market, the announcement led to a notable improvement in the exchange rate of the Naira against the dollar.
The parallel market saw a significant strengthening, with the Naira appreciating from N940/$1 to N880/$1, representing a substantial increase of N60.
In the official Investors’ and Exporters’ (I&E) forex window, the Naira began with an opening rate of N774/$1 but further appreciated to N759/$1 by the end of the trading session following the announcement.
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The delay in implementing the $3 billion crude repayment loan might be due to the withdrawal of other lenders who were originally part of the syndicated transaction. According to an insider, who spoke with Daily Trust.
Afrexim Bank was set to contribute only $250 million to attract other lenders who have significant exposure to Nigeria and face obligor limits.
However, while cold feet of investors has been linked to the country’s worsening finances and apparent desperation to defend the naira, a source has said “NNPC is too big a risk so Afrexim bank can’t close the deal without some other investors,”
Data from Afrexim Bank’s financials indicate that the West African region accounted for 45% of loans provided by the bank in the first quarter of 2023.
However, there is no mention of the deal on Afrexim Bank’s official website.
In the midst of these developments, the Nigerian Naira has continued to weaken against the US dollar. On the official market, the Naira opened at 769.66 to $1 and closed at N775.34 to $1.
In the black market, robust demand for the dollar has pushed the Naira’s value further down, with exchange rates ranging from 920 to 925 Naira to $1.
Dealers are reportedly purchasing from willing sellers at N/$915 and selling to buyers at N/$920-925.
