NNPC Secures $3bn Loan with Afreximbank For Naira Stability, to be Repaid with Crude Oil

Afreximbank and the Nigerian National Petroleum Company Limited (NNPC Ltd) have jointly signed a commitment letter and term sheet for an urgent loan for the repayment of $3 billion in crude oil.
According to a statement by NNPC Ltd, the signing took place on Wednesday at the bank’s headquarters in Cairo, Egypt.
The agreement will mitigate the impact of the increase in fuel prices and the lack of foreign currency that are related to the naira’s free-floating keeping with President Bola Tinubu’s pledge to harmonise multiple exchange rates.
The naira had fallen to a record low of roughly N900 during the naira float, falling from below N500 per dollar on the official exchange windows.
Since Tinubu stated that gasoline subsidies were no longer in effect on May 29, the price of petrol has increased once, from N540 to N617 per litre.
And when crude prices continued to rise on the global market, oil marketers claimed in a number of stories that there might be another round of pump price increases.
The Consumer Price Index (CPI) for Nigeria increased from the 22.41 percent recorded in June 2023 to 24.08 percent in July, according to data released on Monday by the National Bureau of Statistics (NBS).
With this context in mind, NNPC Ltd. noted in the statement that the emergency loan for the repayment of $3 billion in crude oil would enable some immediate distribution.
The Federal Government’s continuing fiscal and monetary policy measures targeted at stabilising the currency rate market, according to the statement, would be supported by the NNPC Ltd thanks to the payout.
Despite the withdrawal of fuel subsidies, Tinubu had promised Nigerians on Tuesday that the price of petrol at the pump would not rise further.
The president’s response to journalists in Abuja came through his Special Adviser on Media and Publicity, Ajuri Ngelale, after NNPC Ltd announced that there will be no rise in the price of fuel at the pump anywhere in the nation.
Although Tinubu admitted that the downstream industry had inefficiencies that contributed to the debate over fuel prices, he promised that any problems with the efficient supply of petroleum products would be fixed right away.
The labour unions have previously vowed to go on strike at any time.
The government will also receive dollar liquidity from Ogra, according to the company, to stabilise the naira with no risk.
He went on to provide more insight, stating that the emergency loan for the payback of $3 billion in crude oil was not an exchange of crude for refined goods but rather an upfront cash loan secured by the proceeds of a small amount of future crude oil production.
According to him, there would be no danger, and NNPC Ltd.’s exposure would only be enough to pay for a small portion of their rights.
Regarding the loan’s advantages for Nigerians, Ogra stated that it would help NNPC Ltd. pay taxes and royalties in advance and provide the Federal Government with the critical dollar liquidity it needs to risk-free stabilise the Naira.
According to Ogra, the money would be dispersed in phases or tranches in accordance with the particular demands and needs of the Federal Government.
“A strengthened Naira as a result of this initiative will lead to a reduction in fuel costs.
“This means that if the Naira appreciates in value, the cost of fuel will drop and further increases will be halted.
“A stronger Naira will result in lower prices from the current level, making subsidies unnecessary. The deregulation policy remains unchanged,” Ogra added.

Source: Allnews Nigeria

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