Nigeria secures $3 billion crude oil repayment loan to stabilise currency

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NPDC which is the Crude Oil and Petroleum Exploration and Production Company of NNPC in Nigeria

Nigeria’s state-run oil company, NNPC, announced on Wednesday that it has obtained a $3 billion crude oil repayment loan from the Cairo-based Afrexim Bank. This move comes as part of the government’s broader reforms targeting a more stable exchange rate market.

The commitment letter, along with the term sheet for this emergency loan, was unveiled on the social platform X, previously known as Twitter.

 

Under the banner “relief for the naira”, NNPC further clarified its intentions behind the loan. The funds will be swiftly disbursed to aid the government in its continuing fiscal and monetary policy adjustments, with a particular emphasis on stabilising the exchange rate market.

Over the past months, Nigeria has been working diligently to reinforce its reserves and arrest the decline of its currency. Notably, its currency had reached unprecedented lows on the black market, especially two months following the easing of trading constraints in the official market.

In light of this financial distress, acting Central Bank Governor, Folashodun Shonubi, made a statement on Monday, hinting at potential measures to influence currency markets. This announcement came after an important meeting with President Bola Tinubu to explore strategies to enhance dollar liquidity in the official market.

While the specific steps remain undisclosed, Shonubi highlighted the president’s concerns regarding the black market rate serving as a local reference, and its subsequent impact on inflation.

President Tinubu has been at the forefront of some of Nigeria’s most significant financial reforms in recent decades. Under his leadership, Nigeria took bold steps including the removal of an expensive fuel subsidy and the devaluation of the naira. These decisive actions rekindled foreign investor interest in Nigeria, a nation previously beleaguered by high inflation rates and mounting debt-servicing expenses.

However, despite these efforts, foreign investors remain hesitant to re-enter the Nigerian market.

As the situation evolves, Nigeria’s financial future hangs in the balance, with the new loan and intended reforms potentially playing a pivotal role in its economic stability.

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