Nigerian state energy firm, the Nigerian National Petroleum Company (NNPC) has inked a strategic deal with Cairo-based Afreximbank to secure a $3 billion emergency loan to help stabilize the Naira. According to local media outlet Nigerian Tribune, this move follows the free fall of the Naira against the dollar.
Naira Devaluation Triggers Fuel Price Surge
Consequently, the devaluation of the Naira has contributed to a bogus increase in the price of petroleum products across the country. Oil merchants in Nigeria have been pleading with the government to deploy a means to salvage the Naira as a matter of urgency.
The price of fuel had suddenly jumped by more than 250% just around the time when a new President, Bola Ahmed Tinubu was elected. Since then, there have been speculations that a higher price surge may be the new reality. The energy firm rose to the occasion and ruled out such speculations about a possible increase in the pump price of Premium Motor Spirit (PMS).
With the $3 billion loan, Afreximbank is looking to assist the West African nation to improve dollar supply in the Foreign Exchange (FOREX) market.
Immediate disbursement of the fund will commence “to support the Federal Government in its ongoing fiscal and monetary policy reforms aimed at stabilizing the exchange rate market,” NNPC wrote on X (formerly Twitter).
No additional detail concerning this deal was disclosed.
Nigerian Naira Loses 40% of its Value
Naira was allowed to trade freely sometime in June, just after President Bola Ahmed Tinunbu tried to simplify Nigeria’s multiple exchange-rate regime which the transition team says has been a core hindrance to foreign investment. Much to the disappointment of Nigerians, the expected jump in foreign inflows has failed to materialize. Rather, the Naira dipped by 40%, marking one of the biggest currency devaluations in such a short while globally.
The release of recent financial statements has demonstrated that the hope of the Central Bank of Nigeria’s (CBN) foreign exchange reserve, valued at $34 billion, to stabilize the Naira is not achievable. Markedly, the financial report showed an undisclosed $7.5 billion transaction with top investment banks JPMorgan Chase & Co and Goldman Sachs.
Noteworthy, the official exchange rate of the Naira closed at 759.86 naira to $1 as against 781.30 naira the day before.
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