Naira exchanges for N740/$ at official market after $3bn NNPC loan, BDC operators' message to CBN

The Nigerian currency, the naira, recorded significant gains against the dollar in the parallel market and official Investors and (I&E) window.

The development comes as the foreign exchange market significantly increased after the Nigerian National Petroleum Corporation Limited (NNPCL) secured a $3 billion facility from AfremiBank to stabilise the exchange rate.

Black market operators lose after CBN's threats

The naira appreciated by N28 or 3.8% in the parallel market as the exchange rate dropped to N885 per dollar from N920 per dollar recorded on Tuesday, August 15, 2023.

The Nigerian currency also appreciated by N21.44 per dollar, representing 3.25% in the official I&E window, as the exchange rate dropped to N759.86 per dollar from N781.30 per dollar on Tuesday, August 15, 2023.

Vanguard reports that black market sources revealed that the strengthening of the naira was due to the recent moves by the Central Bank of Nigeria's Acting Governor, Folashodun Shonubi, to clamp down on speculators.

Shonubi's pronouncement signalled that the CBN would soon take steps to boost forex liquidity and tackle speculators to address the falling value of the naira.

NNPC's $3 billion loan to boost forex market

Recall that the NNPC revealed on Wednesday, August 16, 2023, that it had signed a commercial letter and Term Sheet with AfreximBank for an urgent $3 billion crude oil repayment loan to address Forex scarcity in Nigeria.

The company stated that the facility would provide immediate disbursement to support the Nigerian government's efforts to implement monetary policy reforms to stabilise the exchange rate market.

The Nigerian government reported a 13.6% decline in daily crude oil production for July, which impacted the country's revenue earnings from oil export.

According to the Nigerian Upstream Regulatory Commission (NUPRC), production peaked at 1.8mnpd compared to 1.25mbpd recorded the previous month.

NNPC loan not an oil swap deal, has no guarantees

Per an explanation by the senior special assistant to the President on Digital/New Media, O'tega Ogra, the AfreximBank loan is not a crude-for-refined product swap but an upfront loan against the earnings from a fixed amount of future oil production.

In a series of tweets, Ogra said the national oil company's exposure is minimal, covering just a bit of their entitlements, and that the facility has no guarantees tied to it.

He revealed that the loan would aid the NNPC to settle taxes and royalties in advance and arm the Nigerian government with the necessary liquidity to steady the naira.

Ogra revealed that a stronger naira would lower fuel prices, making subsidies irrelevant.