EXPLAINER:How $3bn Facility Secured By NNPC Will Stabilize Naira, Drive Down Cost Of Petrol

Facts have emerged on how the $3bn facility secured by the Nigerian National Petroleum Company Limited will enable the Federal Government to stabilize the foreign exchange market and boost the value of the naira against the dollar.

The Nigerian National Petroleum Company Limited on Wednesday secured the $3bn emergency loan from the African Export-Import Bank to ease pressure on the naira.

The loan would enable NNPCL defray taxes and royalties in advance and provide the Government dollar liquidity to stabilize the Naira.

THE WHISTLER learnt that disbursement of the loan will be in tranches based on Government requirements.

This will assist in the appreciation in value of the Naira which will translate to lower cost of fuel and further stem the increase in the cost of petrol.

The implication of this is that a stronger Naira will mean lower prices against current level and won’t require any subsidy.

This will enable the government continue the implementation of the deregulation policy, in line with the implementation of the Petroleum Industry Act 2021.

THE WHISTLER understands that repayment will be against future crude oil production.

At an event held in Cairo, Egypt, both parties jointly signed a commitment letter and Termsheet for the emergency loan of $3bn.

This transaction will provide some immediate disbursement that will help NNPCL support the Federal Government in its ongoing fiscal and monetary policy reforms aimed at stabilizing the exchange rate market.

The move is expected to boost foreign exchange liquidity into the country and will further drive down the exchange rate between the naira and the dollar.

This is the fourth transaction being consummated between NNPCL and AFREXIM Bank over the last 3 years and goes to further consolidate the mutual relationship between the two entities.

Both Nigeria and NNPCL are shareholders in AFREXIM Bank, with sole purpose of enhancing investments and growing prosperity in Africa.

The agreement for the loan which was sealed on Wednesday in Cairo, saw the Group Chief Executive Officer of NNPC Ltd, Mallam signing for the National Oil Company while Dr George Elimbi, Executive Vice President Afreximbank signed for the bank.