Nigerian state-owned energy company NNPC signed a $3 billion deal with Afreximbank on Wednesday that NNPC said is aimed at helping the West African nation boost dollar supply in the foreign-exchange market.
(Bloomberg) — Nigerian state-owned energy company NNPC signed a $3 billion deal with Afreximbank on Wednesday that NNPC said is aimed at helping the West African nation boost dollar supply in the foreign-exchange market.
Nigerian National Petroleum Company’s agreement includes an immediate disbursement of some of the funds “to support the Federal Government in its ongoing fiscal and monetary policy reforms aimed at stabilizing the exchange rate market,” NNPC said in a post on X, formerly known as Twitter, without providing additional details. A government spokesman confirmed the accuracy of the post.
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NNPC loans are typically secured against barrels of crude oil accruing to the company from its joint-venture contracts and product-sharing partnerships.
Nigeria allowed its currency to trade more freely in mid-June after newly elected President Bola Tinubu moved to simplify the nation’s multiple exchange-rate regime, which had deterred foreign investment. But an expected jump in foreign inflows has been slow to materialize, and the naira has lost 40% of its value since then, the biggest decline worldwide.
Initial hopes that the central bank’s foreign exchange-reserves of about $34 billion gave it enough firepower to stabilize the naira were dashed after the bank published long-delayed financial statements last week, showing a previously undisclosed $7.5 billion in transactions with investment banks JP Morgan Chase & Co. and Goldman Sachs Group Inc.
Read More: Naira Loses Key Support After Nigeria FX Reserve Revelations
The central bank also reported foreign-currency forward contracts of almost $7 billion, which when combined with the JPMorgan and Goldman Sachs deals, indicated foreign-exchange reserves could be at least 40% lower than previously disclosed. The naira plunged in the unauthorized market before recovering on Wednesday. The official exchange rate closed at 759.86 naira to the dollar, stronger than the previous day’s close of 781.30.
The value of the NNPC loan agreement is sizable for Afreximbank, the Cairo-based pan-African multilateral lender. Afreximbank had $26 billion on its loan book as of June, according to data on its website.
—With assistance from Ruth Olurounbi and William Clowes.
