The African Export-Import Bank (Afreximbank) has been lauded for the release of the first tranche of $2.25 billion out of the $3.3 billion foreign exchange (FX) support facility to ameliorate the acute liquidity shortage which had negatively impacted investors’ confidence in the country.
The second tranche and the balance of the facility which is expected to ease FX scarcity, is expected to come in January.
Afreximbank, the Mandated Lead Arranger, and United Bank for Africa (UBA) the Local Arranger, closed $3.3 billion liquidity support for Nigeria through a structured financing arrangement with NNPC Limited on December 29, 2023.
UBA is also acting as the Onshore Depository Bank for the transaction which also has Gunvor, Sahara Energy, and other major oil traders as others to join the parties.
The transaction 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 have 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 for resolving economic issues in the country.
Analysts, who spoke on the development according to THISDAY, welcomed the initiative and the banks to support the economy in times of need.
The Managing Director/Chief Executive of Dignity Finance and Investment Limited, Chijioke Ekechukwu, said the intervention will 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, the Chairman of the 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, the Managing Director/Chief Executive, SD&D Capital Management Limited, Idakolo Gbolade, said the Afreximbank loan would ease the pressure on the naira in the interim while other robust measures to be taken to increase FX revenue in the coming months will further help the resolve of FX changes 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 other government initiatives will bring in foreign investors which will start yielding fruit from Q1, 2024.”
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