The Nigerian National Petroleum Corporation (NNPC) Limited has obtained a $3 billion loan from the African Export-Import Bank (AfriEXIM Bank) to support the naira and stabilise the foreign exchange market.
The loan will be repaid with crude oil at an interest rate of between eight percent and 11 percent.
The NNPC Limited and the AfriEXIM Bank signed a commitment letter and a termsheet for the crude-for-cash funding on Wednesday at the bank’s headquarters in Cairo, Egypt.
The loan will provide some immediate disbursement that will enable the NNPC Limited to support the federal government in its ongoing fiscal and monetary policy reforms aimed at stabilizing the exchange rate market.
The loan will also save Nigeria from approaching the International Monetary Fund (IMF) for loans, which may come with stringent conditions and affect the country’s sovereignty. The loan will bring relief to the local currency, which had depreciated significantly against the dollar over the past week.
The naira depreciated on Friday to close the week at an all-time low of N950 to the dollar at the parallel market.
On Monday, President Bola Tinubu met with the acting CBN governor, Folashodun Sonubi, who said the apex bank will roll out its plans to stabilise the naira. The local currency appreciated on Wednesday, recovering from N950 per dollar to N890 to the greenback.
The NNPC Limited is the state-owned oil company that accounts for most of the country’s oil production and exports. The NNPC has been facing financial challenges due to low oil prices, high operational costs, and corruption allegations. The NNPC has also been struggling to meet its obligations to its joint venture partners and contractors.
The AfriEXIM Bank is a multilateral financial institution that provides trade finance and investment solutions to African countries and businesses. The bank has been supporting Nigeria’s economic development and diversification efforts through various initiatives and programmes. The bank has also been collaborating with the NNPC on various projects in the oil and gas sector.
