$7 billion inflow: Nigeria’s naira set to soar as government securitizes NLNG dividends

The federal government has formulated a plan to securitize approximately $7 billion in dividends derived from the Nigerian Liquefied Natural Gas (NLNG).

ThisDay reports that an official at NLNG gave this revelation on Thursday, October 26.

The source says that the Tinubu-led administration anticipates receiving the $7 billion through a consortium led by Standard Chartered Bank in the coming week.

Additionally, the federal government expects to receive inflows from a $3 billion emergency loan secured by the Nigerian National Petroleum Company Limited (NNPCL) from the African Export-Import Bank (Afreximbank) on August 16.

This combined inflow, expected in the short term, amounts to $10 billion.

The organization and execution of this plan are overseen by the Federal Ministry of Finance Incorporated, which holds shares in the NLNG.

This initiative aligns with the recent announcement by the Minister of Finance and Coordinating Minister of the Economy, Mr. Wale Edun, who stated that the country is poised to receive approximately $10 billion in the near future.

These funds are expected to play a crucial role in addressing the foreign exchange (FX) backlog and contributing to the stabilization of the national currency, the naira.

Quoting an NLNG source, Thisday wrote: “NLNG has been performing and used to pay dividends of about $6 billion, but because our oil production and gas production have fallen, dividends also fell to about $2 billion. But what this government has decided to do is to securitize these dividends over a period and use it to borrow money to curb the depreciation of the naira against the dollar.

“The target is to boost dollar liquidity by flooding the market with dollar supply and try to push the naira/dollar exchange rate to about N800/$. So, by next week, they may get $7 billion from the Standard Chartered Bank consortium and get the $3 billion from Afreximbank, under the agreement reached with NNPCL.

“At the same time, the government is making serious efforts to ramp up oil production significantly. The idea is to use the entire $7 billion to settle some old FX forward obligations and reduce pressure on the naira, improve liquidity and allow the currency to appreciate.”

What you should know

The Federal Government has plans to increase oil production through two fundamental objectives: ensuring security in the oil-producing areas of the Niger Delta where crude oil theft has become rife and development initiatives in the Niger Delta.

These goals, when achieved, will increase investments in the oil sector from the private sector.

Earlier today, the naira experienced a significant increase in value, strengthening by N166 against the U.S. dollar in the Peer-to-Peer (P2P) market.

This shift in the exchange rate reflects a change in the strategies employed by currency traders.

Meanwhile, on Thursday evening, the naira reached a peak exchange rate of N1279 to the U.S. dollar. However, on Friday morning, it had settled at N1113 per dollar.

Insights from various markets indicate that this rise in the naira’s value might be attributed to a lack of buyers willing to transact at the higher rate of around N1300 per dollar.

It appears that some individuals are refraining from purchasing at this rate, anticipating a potential strengthening of the local currency.