FX Liquidity Boost as FG Receives $2.25bn Afrexim Bank’s Credit Facility

The federal government yesterday finally received $2.25 billion out of the $3.3 billion foreign exchange (FX) facility from the African Export–Import Bank (Afreximbank).

The FX inflow has been received by the federal government.

The long-awaited credit support seeks to ameliorate the acute FX shortage in the country which had constrained economic activities and doused investors’ confidence.

Earlier in December, President Bola Tinubu had assured Nigerians of the commitment by his administration to resolve the FX backlogs through injection of funds into the market.

Speaking at the opening of the recent 2023 Bank Directors’ Summit in Abuja, Tinubu had said funding of liquidity in the FX market, even though a short-term solution, remained critical for the economy at the moment.

There were concerns by investors and stakeholders that the government appeared to have reneged on its earlier commitment to inject between $7 billion to $10 billion into the FX market to clear the existing backlogs that impaired investors’ confidence in the economy.

However, Tinubu, who was represented at the summit by Minister of Finance and Coordinating Minister of the Economy, Mr. Wale Edun, had insisted there was ”no reason to feel that the indications that were made earlier had changed”, adding, ”It just takes time.”

He had said the government was doing everything in its power to try to attract funds that would shore up liquidity in the FX segment.

However, yesterday’s receipt of the first tranche of the funding intervention came as a huge relief to the federal government on the one hand and investors on the other hand.

The initial tranche was reportedly paid into the federal government’s account while the balance of $1.05 billion was due next week.

Speaking to ARISE News, the minister said it was in the position of Afreximbank to announce the disbursement at the appropriate time.

He said he was looking at a range of support mechanisms capable of bringing about all-round improvement in government finances and FX liquidity and was optimistic that Nigeria was on the right path.

While Afreximbank is the lead arranger of the $3.3 billion loan, some other sub-lenders included VITOL, Guvnor, one of the world’s largest energy trading houses by turnover, Sahara Energy Group, Oando and the United Bank for Africa which chipped in $100 million.

Earlier in August, the Nigerian National Petroleum Company Limited (NNPC) had announced that it had secured a $3 billion emergency loan from the African Export-Import Bank to stabilise the country’s volatile foreign exchange market.

The new deal came over a year after NNPC said it similarly secured a $5 billion corporate finance commitment from the Afreximbank to fund major investments in Nigeria’s upstream sector.

Although the NNPC’s statement was silent on specifics in terms of the volume of each instalment of the FX expected and the quantity of crude oil to be repaid, the deal was expected to boost foreign exchange liquidity into the country and prop up the value of the naira against the dollar.

Analysts and business leaders have commended effort of Afreximbank bank to fund the country out of its FX liquidity challenges.

They said the funds would  help curtail the exchange rate volatility and ease rising inflation.